DeepSummary
In this episode, Ben and David interview Tom Cowan, the co-founder of TDM Growth Partners, a long-term investment firm focused on concentrated portfolios of public and late-stage private companies. They discuss TDM's unique approach of not fundraising and having the same families invest with them for the past 18 years, leading to impressive annualized returns of 26%.
The conversation centers around TDM's analysis comparing the current tech market downturn to the dot-com bubble burst and the 2008 financial crisis. Tom shares insights on the similarities and differences between these market resets, such as the faster recovery of high-growth companies after the dot-com crash.
Tom emphasizes the importance of emotional stability, long-term thinking, and focusing on fundamentals and valuations when investing in these volatile periods. He stresses the need to buy great businesses at reasonable prices and hold them for 5-10 years, rather than being swayed by short-term market fluctuations.
Key Episodes Takeaways
- TDM Growth Partners is a unique investment firm that takes a long-term, concentrated approach to investing in public and private companies, without the typical constraints of fundraising cycles or mandate restrictions.
- Analysis of previous market downturns, like the dot-com bubble and the 2008 financial crisis, can provide insights into the potential recovery patterns and opportunities for high-growth companies in the current tech market downturn.
- Emotional stability and a long-term perspective are crucial for investors during volatile market periods, allowing them to focus on fundamentals and valuations rather than short-term fluctuations.
- High-growth companies often recover faster and outperform broader market indices in the initial years following a market trough, as evidenced by the dot-com crash recovery.
- Valuations matter significantly when investing in high-growth companies, as overpaying can significantly impair long-term returns, even for successful businesses.
- TDM places a strong emphasis on investing in businesses with strong cultures and ethical practices, believing that people and culture are key drivers of long-term success.
- Dollar-cost averaging into quality businesses during market downturns can help manage emotional stability and position portfolios for long-term growth as the market eventually recovers.
- While market timing is difficult, periods of market volatility and dislocation can present attractive opportunities for long-term investors to deploy capital in high-quality businesses at reasonable valuations.
Top Episodes Quotes
- “Ultimately, when we sit back and look at the data, it's a fundamentals win.“ by Tom Cowan
- “You've really got a deep dive into what you're talking about. And I think this current period is a great example.“ by Tom Cowan
- “We want to be proud of those businesses that we invest in. We want to be proud to own them, we want to be proud the way they behave.“ by Tom Cowan
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Episode Information
ACQ2 by Acquired
Ben Gilbert and David Rosenthal
6/20/23
Every now and then, we come across super interesting and under-the-radar (at least to us!) public markets folks like NZS Capital who make us think differently about the art of investing. TDM is another one of those groups — founded 18 years ago in Australia, they’ve compounded a single, private pool of capital at 26% per annum over nearly two decades. That’s Warren & Charlie territory!
TDM recently published a memo comparing the current “post ZIRP bubble” market with what happened in the years following both the dot-com crash and the GFC in 2008. As always, past performance isn’t necessarily predictive of the future, but what happened back then surprised us and might surprise you too. More importantly, it gave us the perfect excuse to sit down with TDM cofounder Tom Cowan and share the conversation with you all. Tune in and learn alongside us!
Links:
- TDM’s 2023 Market Memo
- The current BVP Cloud Index
- Follow TDM on Twitter or LinkedIn
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