Nick and Zack’s Nomad Investment Partnership achieved an exceptional track record from September 10, 2001, to December 31, 2013, with a remarkable +921% return. Their annualized returns before and after performance fees were 20.8% and 18.4%, respectively.

Their investment journey mirrored Warren Buffett’s, transitioning from seeking deeply undervalued stocks to identifying great compounders. What set their approach apart was their recognition of the power of “Shared Economies of Scale,” exemplified by companies like Costco and Amazon. By the time they wound down the fund in 2014, it held only three stocks: Berkshire Hathaway, Costco, and Amazon.

In 2020, Nick Sleep invested in ASOS PLC, a UK-based online apparel retailer. He had initially bought ASOS shares in the 2000s, making a substantial profit. However, ASOS’s stock price dropped sharply in mid-2021, primarily due to intense competition from Chinese companies like SHEIN and TEMU, a misstep reminiscent of Buffett’s investment in Dexter Shoes 30 years earlier.

The takeaway here is the importance of assessing the “moat” of a potential compounder from a global geopolitical and trade perspective. Is the moat local, like See’s Candies, or global, like Coca-Cola? To make “Shared Economies of Scale” effective, the brand must be the platform, not just a product style, as seen with Costco and Amazon, whose moats differ greatly from companies like Apple.

Value investing is challenging, as it often requires high-level qualitative assessments where numbers alone don’t provide answers. At its core, value investing is also a personal journey of inner clarity, making it a deeply meaningful pursuit.

An alternative approach is diversifying a portfolio with a more systematic, mechanical method—though that’s a topic for another time.