Focus on the batting average
I have observed that long term outstanding investment track records are built upon good “batting averages” rather than a few “out of the ball park” decisions. To develop an outstanding batting average, it is far more important to minimise the inevitable investment mistakes than be obsessed with trying to find the 10x investment winners. Many investors are very happy to talk about their investment winners but very few talk about their error rate. Charlie Munger commented: “It’s a good habit to trumpet your failures and be quiet about your successes.” However, maintaining an outstanding batting average is extremely difficult. It requires time, focus, discipline, patience, extensive investment due diligence and the ability to forgo opportunities. At Magellan, we are obsessive with the rigour of our investment research, which I have often described as “inch wide and mile deep”. Extensive investment due diligence and staying within your circle of competence is critical to achieving a low error rate and improving the investment batting average.