Stockbridge

“We're the largest investor in our private equity funds, and we're also, as a group, the largest investor in Stockbridge.”

“We're essentially long only. We have a right to short, but we've done it only a couple times in our history”

“And we found that managements, ah, are really good at executing, continuing to do what they have done in the past, and that you have to be really, really careful before you're asking a management team to do something different.”

“We were religious about keeping our five-year internal rate of return models up to date and trading off that. The higher the IRR, the bigger the position. We learned that wasn't the best way. We changed over time at that point to adding a conviction element”

“In 2017, we bought about 20% of the company after they were through their accounting restatement and then subsequently joined the board.”

“There was a business that we were invested in at Stockbridge, a company called Skillsoft. It's an education software business that Berkshire private equity ended up taking private. And we got to see what public information would allow us to understand about th…”

“Across the firm, we chose not to have any walls between the two businesses.”

“We've seen crazier prices on both sides by far in the public markets than I think you tend to see in the private markets.”

“For the first time, we did comparable sheets with public companies, and we were seeing private companies go for more than public companies. So the control premium was higher than the liquidity premium.”

“And so that ultimately leads to a portfolio of typically around 15 names. We've had a position become up to a quarter of the portfolio. That's more the exception. Typically the largest position will be in the 15%. And then a bunch of things around six percent.”

“As an entire group, we discuss every idea that's making its way into the portfolio from a very early stage, which we call our tear sheet stage, where we're just introducing the whole team to the business to a final investment memo. Everybody from the newest an…”

“So we don't invest in things like, is the drug going to be approved, or where commodity prices will ultimately drive the answer.”

“Very, very few people were good at it, and it took up most of your time. To get shorts. Plus you were in some ways leveraging your longs in order to justify your shorting. So it just seemed to us to make no sense to do that.”

“Selling winners too early has been a constant source of frustration, one that you can just open up your Bloomberg and see it hit you in the face every single day.”

“The private equity side is divided into industry teams. We put one of our people on each one of their industry teams, so that way they can learn about what they're learning about the industry.”

“I think if we were a fast-twitch Hedge fund making multiple decisions every day on trading, it wouldn't work. You'd need single points of decision, whether there's a number of them or one of them, but we don't make a lot of decisions.”

“Well, there's three reasons that you sell. One is you lose conviction in the thesis, and you think you should move on. Two is it gets so expensive that you think the returns looking forward aren't acceptable, or at least certainly compared to what else. Or thr…”

“Excel-based valuation methodology doesn't really capture the full distribution of outcomes. A good business with great tailwinds and a great management team can create their own luck, and it's hard to model that.”

“We do a lot of work up front, but we do multiples of that work after we own a company. And just ensuring that we're not holding onto something simply because we did a lot of work and we have endowment effect and it's in our portfolio.”

“So we found it's extremely rare that we end up with MNPI on a company and the places where we've run into issues They've tended to be opportunities, not conflicts or issues. We've co-invested in things.”

“I don't think we will make market-based bets of now's the moment to invest in public and now's the moment to invest in private.”

“It's very easy in this to think about making a shorter term trade or adding a smaller position to the portfolio, but that's not really what we're set up to do. And when we do that, We're more likely to make a mistake, and so what we've really honed in on is ju…”

“We invest in two to three things a year. We probably look deeply at 10 to 20 things a year with a pretty big team, and so the several hundred that we look at, we're putting them down very quickly for one of those reasons.”

“Berkshire private equity tends to invest in smaller businesses has always invested in smaller businesses than we tend to invest in. So there's very little direct overlap in the companies we're looking at.”

“So the key is if we have a problem with the company, it's better for us to sell than it is for us to go on the board and try and change it.”

“Our no is not that this isn't going to be a great investment, it's that we're not going to get to high conviction that this is going to be a great investment, and that makes it a little easier.”

“For the first two years, I think we invested exclusively internal capital and tried a lot of things. So like Rob mentioned, we tried to short. The first short, I think, lasted a week. And we realized we were not going to be good at it. We didn't want to do it,…”

“And so when we started Stockbridge, that was the first company we looked at and we invested, it has become and been our largest position through most of our history.”

“The private data would be great if you had an enormous change thesis. If you thought management was doing the wrong thing on major operational issues and you thought you could do better, I don't know how you make that decision without internal data.”

“And one of the things we've done is assembled a database of Every single quarry in the United States and what the ownership is of that quarry and the population trends around that quarry.”

“We build a five-year model. Which tends to make you have to think at least 10 years out because someone's gonna buy the business from you, and we want mid-teens or better returns.”

“It's important to have evidence in a long-term investment that things are working. That may or may not show up in the stock price, but there's a set of markers along the way that give you confidence that your long-term thesis is right.”

“While let's say a company like NVIDIA is an extraordinary business by all accounts and one we've looked at, we just don't think we would be a great owner of that business at this point in time. Because while I can tell you all the great things about NVIDIA, I …”

“That's why we demand unanimity among the senior people to invest in something, because you're gonna get hit with a bump, and so when you get hit with a bump, you have to have enough information, enough belief to evaluate the new information, but be able to sti…”