Q&A Series: Managing Market Pressures and Evaluating Serial Acquirers

I wanted to share with you some edited excerpts from a Q&A session I held with readers a while back. In this email, we’ll discuss how to handle market pressures and our view on serial acquirers.

How do I quiet pressures from the market?

I think the number one thing is, I have the luxury of owning individual stocks, so I try not to spend much time thinking about the market, but instead focus on individual businesses. When the market is expensive and there are few opportunities, I have the ability to hold a lot of cash. I’m fortunate to have clients who are comfortable with me doing that.

I’m extremely aware that if I allow the market to waltz into my office, and if I look at the portfolio all the time, the market will get the worst of me. My frequency will calibrate to the frequency of the market.

I rarely have my TV on, or if I do, it usually plays classical music. A lot of times I go through the day forgetting the market is open. To answer your question, I think you have to actively work on this, countering the thinking that if you do nothing, you’re going to lose. The market will waltz into your life and start running it if you’re not careful.

Let me give you one more example. I have my office, where I have computer screens, and then I have another room I call my reading cave. Why is it called a reading cave? Because I keep it at a very low temperature – I like cold – and there’s no computer, just a chair, a blanket, headphones, and an iPad that’s connected to the internet but doesn’t have Slack or other messaging apps. I just sit there and read. I’m forcing myself to be disconnected from the market.

It’s a proactive effort. Like everyone else, I’m susceptible to market influences. Without deliberate actions to counteract this, it’s easy to become a victim of market pressures. The key is to actively create an environment that allows you to focus on what truly matters: the businesses you’re investing in and your long-term strategy, rather than the day-to-day noise of the market.

How do you feel about serial acquirers?

That’s a good question. For companies that are serial acquirers, it has to be their business model. It’s a very different skill set than somebody who acquires companies occasionally. Take Constellation Software or Danaher, for example – that’s their business model. Companies that are very good at this, I have no problem with them.

Where I usually struggle is with companies that become tourists in acquisitions. It’s a different skill set and a different culture. These companies are often very difficult to value.

So, you don’t usually see these types of companies in our portfolio, but I think there is a place for them. I don’t have a problem with them per se, but if one of my companies decided to become a serial acquirer, I would probably sell the stock. In these cases, you’ve got to prove it to me first.

It’s not something we typically invest in, because it adds a layer of complexity and unpredictability. The success of these companies often depends on their ability to continue finding good acquisitions at reasonable prices, which becomes harder as they grow larger. But for those who do it well, it can be a powerful growth strategy. It’s just not one we’re usually comfortable betting on without a proven track record.

Key takeaways

• Actively defend against market pressure – The market will “waltz into your office” and calibrate your thinking to its short-term noise if you let it. You must proactively create barriers: turn off financial TV, avoid constant portfolio checking, and remember that doing nothing when there are no good opportunities isn’t losing – it’s discipline.
• Physical separation creates mental clarity – Your “reading cave” – cold, disconnected from messaging, with just books and classical music – forces deep thinking about businesses rather than market movements. Where you think determines how you think.
• Focus on businesses, not market pressure – The luxury of owning individual stocks means you can ignore broad market movements and concentrate on understanding specific companies. When the market is expensive, holding cash isn’t failure – it’s intelligent patience.
• Serial acquisition requires it to be the core business model – Companies like Constellation Software that are built around acquisitions can work, but “tourist acquirers” who occasionally buy companies usually struggle. It’s a completely different skill set that’s difficult to value.
• Prove it first, then invest – If one of your portfolio companies decided to become a serial acquirer, you’d likely sell the stock. The complexity of the acquisition game means these companies need to demonstrate mastery over time before earning your investment dollars.