Actionable insights — Adding to the Portfolio

1. Publish the limit price before the market opens

1. Decide the dollar amount, the share count and the maximum price you will pay, and write all three down before the session starts.
2. Use a limit order rather than a market order, so the decision is the price rather than the moment.
3. Commit publicly (or at least in writing) so the price cannot be quietly revised upward once the order does not fill.
4. Accept a missed fill as a valid outcome — the discipline only exists if the order can fail.

• Limits set so far below the market that they never fill, which converts discipline into inaction.

2. Deploy new money into existing conviction before adding new names

1. When new cash arrives, first re-rank the positions you already own by expected return; only look outside if none clears the bar.
2. Size the adds by conviction rather than equally — the name you most want to own long term takes the largest share.
3. State the terminal ambition for the largest position, so the sizing is a plan rather than a drift.
4. Note the advantage: you already own the research, so the marginal cost of a decision is low and the risk of a fresh mistake is avoided.

• Averaging down disguised as conviction. Adding to a loser is only justified if the business case has been re-checked, not just the price.

3. Value each business on the metric its own economics demand

1. Ask what accounting distortion sits between reported earnings and the cash an owner receives, and correct for it explicitly.
2. For a serial acquirer, add back amortisation of acquired intangibles — it is required by the rules but is not cash (Buffett's "owner earnings"). Kelly Partners calls this NPATA.
3. For an asset owner, use the cash actually distributable and the company's own asset value, not accounting profit.
4. For a reinvestment compounder, use the return on each incremental dollar rather than any multiple, because that is what the value is built from.
5. State the metric you are using and why, so the number can be argued with.

• Add-backs that flatter. Amortisation of acquisitions is defensible; amortisation of capitalised development spend that must keep recurring is not.

4. For a reinvestment compounder, track cash return on incremental capital

1. Take the change in cash generated over a period and divide it by the capital invested over that same period.
2. Read the result as "for every $100 invested, this business now produces $X a year" — the compounding rate the business itself is achieving.
3. Compare it with the multiple you are paying: a high incremental return can justify a multiple that looks expensive on trailing earnings.
4. Monitor it for decay, since a shrinking incremental return is the first evidence the runway is closing — well before growth slows.

• Acquisition prices creeping up. The incremental return falls first through the multiples paid, not through the businesses bought.

5. Answer your own doubt with a base rate, not with encouragement

1. When underperformance prompts "should I change something?", first find how often the best practitioners of your approach have lagged.
2. Use a long, verifiable record: Buffett underperformed in 20 of 64 years — one third of the time.
3. Compare your current drawdown against that base rate before concluding anything is wrong.
4. Adopt an explicit expectation (Rochon's Rule of 3: one year in three the market falls 10%, one stock in three disappoints, one year in three you lag) so the next episode is anticipated rather than diagnosed.

• A base rate used as permanent immunity. It calibrates how long to wait; it does not prove the current thesis is right.

6. Frame the portfolio as an income engine to make holding easier

1. Compute the portfolio's free-cash-flow yield and express it as cash per day — a number that does not move when prices do.
2. Project it forward on a stated growth assumption, and convert back to a value only at the end, using an assumed exit yield.
3. Run the projection twice: without contributions and with them, to show what the savings rate alone contributes.
4. Label the assumptions out loud — growth rate, exit yield, horizon — because the output is extremely sensitive to all three.

• The exit-yield assumption doing quiet work — shifting from 5.8% to 4% is itself a large multiple expansion baked into the terminal value.

7. Close a succession worry with a verifiable fact, not reassurance

1. When a founder-operator leaves, identify precisely what they contributed — usually capital allocation rather than operations.
2. Look for evidence that the function is retained: a board seat, continued ownership, an internal successor trained in the same discipline.
3. Prefer third-party documentation (a shareholder letter, a proxy filing) over the company's own reassurance.
4. Size the position for the residual risk rather than treating the question as closed.

• A board seat standing in for operational control. It preserves capital-allocation influence, not day-to-day execution.