Lessons from Nomad Investment Partnership Letters — Part 3

This post looks at common traits of the businesses that Nomad Investment Partnership invested in. The first two parts of the series looking at Nomad’s research process and philosophy are here and here.

All The Small Things

Nomad prospered by doing things others didn’t do. In an industry of specialists, Nick and Zak were generalists. While most mutual funds held stocks for less than a year, they owned stocks for five years. Similarly, Nomad focused heavily on culture in their research and invested in businesses with great character.

Like quality, culture is difficult to measure, but tremendously important. Culture doesn’t fit neatly into a spreadsheet, so it’s easy for investors to avoid or undervalue. To Nomad, this spelled opportunity. As they wrote in their 2005 annual letter:

In the markets investors tend to latch on to what can be measured, aided by the accountants and to some extent by their own laziness. But there is a wealth of information in items expensed by accountants, such as advertising, marketing and research and development, or in items auditors ignore entirely such as product integrity, product life cycles, market share and management character.

To Nomad, culture wasn’t about office happy hours or ping pong tables. It was organic, often engrained at a firm’s genesis. Among other attributes, great character meant attention to detail, frugality, long-term thinking, and management…