Capitalizing on Low Expectations Put a Cap on Industry Exposure

Look Down Before Looking Up

To some extent, balance sheet risk is a character issue for us. The CEO whose company has a great balance sheet probably isn’t going to make the big, dumb acquisition that will kill the company. He’s probably not the guy throwing $2 million birthday parties for his third wife at company expense. Other investors like the leverage that having debt gives you on the upside, but we generally try to look down before we look up – leverage doesn’t look so great from that perspective.