Infuse a long-biased public equity hedge fund focused on beating the S&P 500. If you want to subscribe to only the Infuse quarterly letters, make sure to navigate to your profile → manage subscription → turn off all notifications besides Infuse.
CORE VALUES
Our core values are an acronym that spells Infuse. That was intentional from the very beginning. We wanted our core values infused into the fund itself.
I - infinite
We are playing an infinite game. We firmly believe that business is one of the most powerful forces of good in society and because of that, investing can be a non-zero sum endeavor. We want partners with the same long-term mindset so we can support the brightest people who are creating the strongest companies.
N - no
In today's world of plentiful opportunities, saying "no" is a superpower. Saying no to partners who don't have the same long-term vision as us. Saying no to great companies that just aren't top-tier. Or saying no to good opportunities that take us away from doing the most important work for partners. Saying "no" is much easier when you know what you need to focus on. Extreme focus is the driving force behind this core value.
F - fellowship
In the industry, principals are held to a fiduciary duty which means that they don't act in a way that harms clients. We think that is far too low of a bar. Instead, we think that we should treat you like a good friend or a family member. If we wouldn't offer our strategy to them, why should we offer it to you?
U - uffgeva
This is an Amish word that means "the renunciation of one's rights in service of others". We think that idea is core to good business. The businesses that truly serve customers will grow and thrive and we want to model that in our own business as well as the ones we invest in.
S - soli del gloria
This means "glory to God". My faith inspires me to work diligently for the One who gives me purpose.
E - excelsior
Another Latin word that means "ever higher". This is a testament to constantly striving to improve. Without a growth mindset, we will stagnate and be unable to deliver world-class returns for the next several decades. We don't congratulate ourselves when we are doing well. There is always room for improvement.
HIGH STANDARDS
We invest in the fastest-growing, highest-quality businesses in the world with the shortest payback periods. Fast growth usually indicates rampant customer demand and strong operating leverage signals effective execution. The combination of these two leads to high rates of intrinsic value growth. When valuation assumptions are reasonable, this leads to supernormal compounding. We compound your capital by relentlessly focusing on these three variables -- growth, quality and valuation. We don't want just one of them, we want all three. If you want much more detail about our process, please refer to this post.
EDGE
Our edge is that we ruthlessly focus on the best. We aren't just looking for companies that are doubling revenue every year, have the largest moat, or the lowest EV/FCF. We are looking for the handful of companies that rank in the top 1% along the growth, quality, and valuation continuums. We truly have long-term investors with an extremely flexible mandate which allows us to concentrate on owning only the best. We don't need to compromise on any of our criteria. Our vision is a beautiful, virtuous cycle where our portfolio companies grow stronger every year, giving us time to find even stronger companies.
Vision
My goal is that Infuse would be the best-performing public equity fund over the next 50 years. I realize that sounds crazy but that’s the goal – long-term, world-class returns, not absolute AUM. To give us the best odds of accomplishing that goal, there are a few things that might be helpful.
To invert the premise, we can’t have the best-performing fund over 50 years if it doesn’t survive 50 years. One of the main ways that funds dissolve is through excessive leverage. In service of returns, leverage ends up destroying them. To me, the risk simply outweighs the reward, especially since world-class returns are typically derived from situations where there is a lack of agreement about a company. In these cases, stock prices can be wildly volatile. Adding leverage to that cocktail is a recipe for, in the best case, stress, and in the worst case, failure.
However, just making the claim that you want to be the best isn’t worth a whole lot without a strategy to make it a reality. To this end, our plan is to hold a concentrated portfolio of the fastest-growing, highest-quality companies in the world at the best valuations we can find.
Stock prices are a function of two things – earnings and other investors’ perceptions of those earnings. So in an ideal world, we’d buy stocks where earnings increase dramatically while the perception is that the company won’t be able to continue its success. However, perception can be quite fickle. Betting on how other people will view the nature of a company’s earnings in 5 or 10 years is not an easy task. That’s why we primarily focus on the velocity and durability of the earnings growth and then make sure we’re not overpaying.
While our goal is world-class returns, that’s really an output of good decisions. Focusing too much on explicit performance goals can create unintended consequences. As Theodore Roosevelt liked to say, “comparison is the thief of joy.” There’s nothing wrong with wanting to be the best, – however, there is something wrong when it takes your focus off the inputs to the process. Being consumed with the highest returns can also lead to decisions that make the process more fragile – adding leverage being an excellent example.
Therefore, with the long-term goal of world-class returns in mind, we seek to focus on the inputs to the process. After all, that’s what we have control over. Namely, we have control over our specific standards of growth, quality, and valuation. And when we focus, every day, on trying to raise those standards, the outcome will take care of itself.
FULL SLIDE DECK for accredited investors. Thanks for the interest. If you have any questions, reach out at ryan@infuse-am.com