Ruane, Cunniff & Goldfarb Investor Day
St. Regis Hotel, New York City − May 17, 2013
Remarks have been edited for clarity and relevance.
Good morning and welcome to our investor day. We will take questions until 12:30. We have to vacate the room by one o’clock, but we will be around between 12:30 and 1:00 to answer any questions you might still have. Before we begin, I would like to introduce our team. On my right are Greg Alexander and Joe Quinones, who runs the operations of our firm. On my left are David Poppe, who is the president of our firm, Greg Steinmetz, and Jon Brandt. The rest of our team is seated in the front of the room. In alphabetical order, they are Saatvik Agarwal, Girish Bhakoo, John Harris, Jake Hennemuth, Arman Kline, Trevor Magyar, Will Pan, Terence Paré, Rory Priday, Chase Sheridan, Michael Sloyer, and Marc Wallach. Stephan van der Mersch is traveling and cannot be with us today. I would also like to introduce Jon Gross who is our director of client services. In the front row are the directors of Sequoia Fund: Vinny Ahooja, Roger Lowenstein, Bill Neuhauser, Sharon Osberg, and Bob Swiggett. With that, we are ready for your questions.
Suppose that you had a position that grew to 40-50% of your fund, but you felt that the price was still fairly reasonable. Would you feel comfortable about this or what would you do?
We are so far from any position being at that level that it is a hypothetical at this point. A 40% position on our current $17 billion asset base would be $6.8 billion. Even if we were able to own 20% of a company, it would have to have a market capitalization of $34 billion and the prospect of a substantially higher market capitalization in order to make it a compelling investment. If we owned 10%, the market capitalization would have to be $68 billion. That is above our sweet spot for stocks that compound rapidly. Reaching the 40% level would be more difficult in Sequoia than in the separately managed portfolios because of diversification restrictions that apply to registered investment companies. If an existing position reached that level, it would limit our ability to establish other positions of 5% or more of the fund. But if a stock were compelling enough and truly bulletproof, then we would certainly give consideration to holding it at that level. I hope we have that opportunity someday but we are far from there at this point.