The Birth of Time Horizon LP

To my partners, 

In my senior year of highschool, I, along with everyone else in my graduating class, was required to take a semester economics course. Up to that point in my remarkably long 17 years of life, economics was a subject I had never considered significant or relevant. Economics was an after-thought, a check box to graduate, and just another class before I could go home. Much to my surprise, that one semester would significantly alter my future not only monetarily but also psychologically. 

From the first day, I was immediately captivated by the subject. Throughout the course we learned about opportunity cost & scarcity, supply & demand & the effects on prices using charts to visually observe the dynamics, monopolies & oligopolies, consumer behavior, production costs & how it affects operations within a business, monetary & fiscal policy domestically & within international markets, crucial economic activity figures like: GDP, GDP-per capita, inflation, interest rates, unemployment, & the labor market. We even covered “TANSTAAFL” (there ain't no such thing as a free lunch) and Adam Smith’s “Invisible Hand.” While all of these topics are basic and standard across any Econ 101 course, the point is that I became fascinated and passionate about anything related to business, finance, economics, accounting, and markets, instantly. I was obsessed. I would go to the local public library and read anything related to the topics. I had long discussions with a friend, who happened to be the highest academically performing student in the entire grade, about the stock market. It was with him that I first learned what the Dow Jones Industrial Average, Standard & Poor’s 500, and NASDAQ were. I even learned what all the numbers moving up and down on CNBC each day meant and how the percentages were changing relative to price. From extensive reading, I understood ticker symbols, balance sheets, income statements, cash flow statements, quarterly & annual reporting, investor relations sites, active vs passive investing, index vs mutual vs ETF funds, personal finance, blah blah blah. I even recall writing down the biggest % declining stocks (laggards was the section in the newspapers) and tracking the prices throughout the subsequent weeks following immense downward price action. I made it a point to memorize the names of indexes in foreign markets; South Korea/KOSPI, Germany/DAX, Japan/Nikkei 225, Hong Kong/Hang Seng Index, China/Shanghai Composite, Denmark/OMX Copenhagen, etc. Those early months/year of learning basic business were truly the most exciting times of my life. Within each new book uncovered another topic that related to previous topics but had a different impact in the game of business. I would further my financial literacy throughout college, becoming absolutely fanatical about business, and utilizing four full years to amass a library of literature that has now become a significant logistical challenge anytime I decide to relocate. 

Above all things, perhaps the greatest impact on my knowledge of investing was when I stumbled upon Warren Buffett & Charlie Munger. Delving into the investment strategies and principles of each of them, as well as analyzing Berkshire Hathaway’s historical performance, was a pivotal moment in my financial education. Indirectly learning from the two greatest investors of all time, significantly broadened my understanding of value investing and marked the beginning of what I refer to as my ‘enlightenment period.’ From them I not only learned the fundamentals of great business but also the habits of great businessmen. How does someone become the very best at something? What did it take to be better than everyone else, especially in one of the most competitive fields on the market? How much of their success was latent talent vs dedicated effort – being relentlessly focused and deliberate about performing better today and repeating that tomorrow and the next day and the next for years and years? From them, I made it a non-negotiable habit to read books, hardcopy newspapers, online news sources, magazines, business reports, and investing related articles voraciously. Additionally, I became so interested in financial discussion that it is a routine occurrence to be involved in financial conversation with just about anyone. I massively enjoy talking about business, markets, investments, accounting, taxes, and everything in between. To this day I am consistent with those habits and am constantly enriching my comprehension of the world around me. Crucially, Buffett & Munger were the primary source of my interest in the psychology of investing. Perhaps of greater value than pure intellect and fundamentals, it is clear that having understanding and control over the emotion of investing, serves as a greater indicator of financial success over the long term. I am indebted to them, as well as Ben Graham, for introducing me to value investing –  purchasing companies for a discount to their intrinsic value. While common and massively utilized across the industry as an investment strategy, the core principles behind the practice are the approach I take, and will always take, to Time Horizon LP. 

Over the years, I have critically advanced my understanding of business; compounding the knowledge alongside the money. From that economics class to the present, building the foundation of how to view my own business, investments, and the world has not been linear. I have observed an abundance of foolish behavior in markets: chicanery by “professional” money managers, unscrupulous salesman who employ manipulative tactics to deceive clients for their own personal financial benefit, public figures (across all industries) leveraging their mass influence to promote products, which primarily serve to enrich themselves, rather than provide true value to their trusting audience, and perhaps worst of all, the influx of speculative gambling on stocks. My view is that stocks are not lottery tickets. When you own even a single share of a public or private company, you are a committed owner of that company, and your mentality should reflect if you owned the entire business. I do not look at the various financial media source’s day-to-day commentary, what the “professionals” say, what the uber driver says, what my friends + family say, or what the President says to conclude that a company is truly a great business; I look to the business and analyze the facts, data, and figures to come to a rational decision. This approach towards investing has, in my humble opinion, been lost. Simply put, identifying great companies, run by talented managers, that can not only produce high rates of return on invested capital but also reinvest that money at similar rates, and purchasing them at depressed prices relative to intrinsic value, while owning them for an extended period of time will always and has always been the optimal approach. In my estimation, the reason for a lack of long-term investing adoption is attributed to the profound psychological challenge & struggle inherent in maintaining patience & wit in a rapidly evolving, highly competitive, and increasingly complex global landscape. I read somewhere (and experienced first-hand) that the most difficult thing to do in investing is to do nothing while your neighbors, family, friends, coworkers, uber drivers, etc effortlessly generate “easy money” in the stock market. This level of discipline & patience is the foundation of Time Horizon LP. “It’s like Cinderella at the ball, Cinderella's having a wonderful time, and everybody's having a wonderful time, and the music's playing, and the punch is flowing, and everybody expects the clock to strike midnight. But the problem is, there's no clock on the wall. And sometimes, that's the way it is in the stock market. You don't know when the clock's going to strike midnight.” (Warren Buffett) 

To be clear, principle & application are two distinct concepts. I have never and will never guarantee outsized future performance. Anything can happen in markets. In the short-term, markets are inherently unpredictable. They’ve always been that way. However, I firmly believe that building an intelligent & rational model is a major factor in financial success over the long term – a framework I have been refining internally since I first learned about investing. It is in utilizing this framework and the abundance of knowledge accumulated that underpins my conviction that Time Horizon LP will be well-positioned for long-term success. 

Kyle Delmendo 

Founder, General Partner, CIO