The value in saying “No”

value of saying no

Since 2018, I advise – together with my partner Marc-Lennart Bräutigam – the Gehlen Bräutigam Value HI fund. Our passion for investing was awakened much earlier. One skill that I have increasingly come to appreciate in recent years is being able to say “No” often and quickly. In my opinion, especially when looking for new investments this skill is essential. Today, I believe it is an important prerequisite for successful active investing.

The most important resource: time

There is a very large number of listed companies one can analyze as a potential investment – there are well over 5,000 listed small- and micro-cap companies in Europe alone. However, time is unfortunately limited and a focus is therefore necessary. This is particularly important for an investment approach that is based on a deep understanding of the individual companies.

Participating in investor conferences, for example, offers the opportunity to get to know many companies. However, there is not enough time later on to analyze many of these companies in detail and to decide whether they are actually interesting. For me personally, I usually don’t lack good ideas but the time to take a closer look at them. 

It’s okay not to have an opinion

Of course, it is helpful to know more companies and be able to choose from a wider range of situations. However, it’s also important to keep in mind that the best investment opportunities often arise in very challenging situations.

Anyone who remembers the situation in March 2020 may recall how difficult it has been to buy shares in companies at significantly lower prices during the most severe turmoil around Corona. A high conviction in the quality of a company and its management can make the difference in such times to build or increase a position. Such a high conviction in the quality of a company can hardly be created in a few days. It should therefore ideally have been built up beforehand.

In this regard, it’s okay not to know very much about many companies listed on the stock market. In my experience, good investors often say “I don’t know.” They don’t have an opinion about many things. However, they do know a lot about the companies in which they are invested and, above all, they know more than others. 

For us, this means two things:

  1. As active investors, we try to focus only on exceptionally attractive situations and get to know a limited number of companies as well as possible.
  2. It is inevitable to miss good investments. However, that is also perfectly fine.

How do you focus in an environment teeming with new ideas?

“Circle of Competence“: You don’t have to be an expert in every industry or every region. It’s perfectly okay, and can actually be very helpful, to focus on a few niches and build a deeper understanding of those over time.

Checklist: An initial checklist of requirements one has for “investable” companies can also be very helpful. One question at the top of our checklist is: Does the management work for us or primarily for themselves? Particularly in small caps, there are a number of companies that have a lot of potentials, but where it is unlikely to ever be realized under current ownership and/or management or where it will not benefit minority shareholders. In addition, we ask ourselves very early on whether an investment offers the opportunity for an exceptional return (today or in the future).

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Daniel co-founded the investment boutique Gehlen Bräutigam Capital GmbH together with Marc-Lennart Bräutigam in 2018. The focus is on investments in undervalued European small and micro caps. In a concentrated portfolio, the team invests exclusively in the best ideas. Before starting his own business, Daniel worked for two years in investment banking at Barclays where he also met Marc. Prior to that, he completed an MSc Finance at the London School of Economics in 2015.
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