Our Guiding Principles
Our distinctive governing principles guide and define Rowan Street Capital’s investment and business decisions. They reflect our commitment and partnership with our clients.
At Rowan Street, We
(1) Think like business owners
The over-arching principle of our investment discipline is to approach buying stock as though we were buying the whole business outright and retaining management.
(2) Think long term
When making investment decisions we focus on the long-term prospects of the business and look beyond the short-term volatility and market unpredictability. We let volatility work to our advantage as we don’t believe volatility equates to risk. On average, individual stock prices fluctuate more than 75% in a 52-week period. We welcome volatility as volatile markets occasionally offer extraordinary opportunities.
(3) Think independently
We do our own original deep research and believe that independence of thought is key to long-term investment success. We also believe relying on others’ analysis results in paralysis or panic under volatile conditions. Groups (groupthink) have a tendency to reinforce preconceptions and suppress critical thinking.
(4) Stay within our circle of competence
We only focus on businesses that we thoroughly understand. We try not to fool ourselves and are not afraid to put an idea in a “too hard” pile.
(5) Stay curious and always keep learning
We have a very curious mind and strongly believe that if we compound our knowledge every day and go to bed a little smarter than we were the night before, it will significantly add to our compounded returns over time.
(6) Always demand a margin of safety
When analyzing a business, we strive to be conservative and realistic in our assumptions. We are disciplined investors, and purchase stocks only when favorably priced, which protects us from permanent loss of capital.
(7) Avoid leverage
We like to sleep well at night. Leverage can enhance returns, but it can also lead to huge losses of capital from which it can be impossible to recover. You can’t win a race if you don’t finish, and too much debt can take you out of the game at the worst possible time.
(8) Exercise patience and discipline to only invest in exceptional opportunities
There are no called strikes in investing, so we can wait patiently for the truly fat pitches right in our “sweet spot” before taking a swing. Once an exceptional opportunity is identified, we will make bold rather than timid decisions (meaningful bets) where we see high probability of above average returns.
(9) Do a lot of reading and thinking and not a lot of acting
In that we are somewhat the polar opposites to a lot of investors. Many investors do a lot of acting, and not a lot of thinking. We believe that activity is the enemy of returns, and we are quite comfortable doing nothing until there is something to do. “All of humanity’s problems stem from man’s inability to sit quietly in a room alone” – Blaise Pascal.
(10) Eat our own cooking
We believe in having a sizable portion of our net worth invested in our fund. We want our partners’ financial fortunes to move in lockstep with ours.
(11) Communicate with our investment partners as candidly as possible
Our guideline is to tell you the business facts that we would want to know if our positions were reversed.
(12) Have a great time and enjoy the journey
Mastery is not about perfection. It’s about a process, a journey. The master is one who stays on the path day after day, year after year.