We explain why extraordinary companies are the best way to invest

Investing in extraordinary companies

Dear Investors,

A peak into our thinking on why extraordinary companies are the best way to invest.

Sincerely, Raj

I refer to our portfolio as the Extraordinary Companies portfolio.

You might have thought I was being exuberant when I named it “Extraordinary”, but I wasn’t.

The word comes from our motto at Dass Capital - Investing in Extraordinary Companies.

This was my vision when I started the company. I wanted to invest in great companies and to make the investment decisions based purely on the attractiveness of the investment. No side factors.

You might be thinking, “aren’t all investments based on attractiveness?” 

The answer to that is no. Like in any human endeavor people wanting to keep their jobs, impress their bosses or having to follow internal policies, are limited in their ability to invest purely on attractiveness. And that is not even accounting for taste - investment beauty also lies in the eyes of the beholder.

But not at ROA. Here investment beauty lies in the numbers.

So, let me make my case for Extraordinary Companies using numbers.

A few weeks ago, I said that Hermes International was the king of luxury brands (read it here). I even ranked it ahead of Louis Vuitton – another venerable luxury brand.

Over the past 10 years, the total return for Hermes was 25.85%. The total return for Louis Vuitton was 23.04%. A small difference of 2.8%.

Here’s what it means. If you invested 10k in Hermes 10 years ago, today you would have EUR 99,663. If you invested it in Louis Vuitton, you would have EUR 79,518. Your investment in Hermes is worth 25% more than it would have been in Louis Vuitton.

To be fair, both Hermes and Louis Vuitton are fabulous companies, but on the spectrum of fab, Hermes is more fabulous. Even amongst great companies, over 10 years, a small difference in return, leads to a massive difference in wealth.

Let’s use the S&P500 as a proxy for an average company and see what the returns would have been. The S&P500 returned 12.81% over 10 years. In that time 10k would have become 33,379. It would only have been worth one-third of what an investment in Hermes would have returned.

Extraordinary Companies = Extraordinary Returns.

That, my friends, is why we invest in Extraordinary Companies. We’re not exuberant, we’re mathematical.

One problem

There is one problem with our investment style. If you invest in value, you’re a value investor. If you invest in growth, you’re a growth investor. We invest in extraordinary companies. Does that make us extraordinary investors? 

Yep, the words make a pun.

But too late now, you subscribed to this newsletter. If someone says “what kind of an investor are you?” you have to reply “I’m an extraordinary investor”.

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