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What’s up, everyone? Today, we’re covering some highlights from Lincoln Archibald’s interview with Jim Falbe at Saguaro Capital about how AI is making investment decisions!
Saguaro Capital’s LinkedIn says,
“We are modern value investors with a unique and proven ability to fuse deep human-led fundamental research with hypermodern technology to produce exceptional long-term investment results…
… our investment philosophy is simple: Find the best businesses on earth, buy them only at a meaningful discount to intrinsic value, then allow them to compound for as long as possible.”
Jim is currenlty the managing principal/portfolio manager at Saguaro.
About Saguaro
Lincoln: Let’s hear the elevator pitch on your firm!
Jim: We are modern value investors. Our genesis was our AI efforts at Vulcan that we started about 8 years ago. It did so well that we needed to make it its own firm! We are a long-biased equity manager. We have 3 products that are ultra-long-term and concentrated. They are small cap, large cap, and all cap products. They’re all a GP/LP structure. We find the best companies on earth, put them on a list, and then we wait for the rare opportunity to buy when those companies are truly discounted.
Overview of the Firm
Lincoln: Give me a high-level overview of your firm.
Jim: We launched our products in the summer of 2022, so we know we have another 1.5 years until we can establish our track record and scale to where we want to be. We’re primarily investing with friends and family money right now, $25M in AUM, and 10 employees. We launched day 1 with a fully invested portfolio.
Lincoln: Given that you’re fully deployed in your portfolio, how do you justify selling out of positions and replacing positions, and how many changes have you actually made in the last year and a half?
Jim: Our turnover has been very low, if it got up to 20% we’d be concerned. We’d only sell a position if something fundamentally changed about the business, or if there was a deal that is too good to pass on.
Development & AI
Lincoln: What’s your favorite part about running your fund?
Jim: I love developing people. We’ve had a lot of interns even though we’re not a huge firm, and it’s been great to see them grow and develop.
Lincoln: Tell me more about incorporating AI at your firm.
Jim: We love idea sourcing. We’re excited about the fact that you can train AI to do certain things: like telling the difference between a good business and a bad business. At our last firm, we found out that the veteran business analyst’s rate of finding great companies that we ultimately added to our investing list was 2 out of 10. The first proof of concept we did with our AI performed well enough to get more than 7 out of 10 on the list!
We invested in this AI, and now it sources hundreds of top businesses to our analysts. It’s fascinating that the AI suggests business that we overlook because of geography, popularity, and even bias!
Conclusion
That’s how AI is making investment decisions at Saguaro Capital! Click here to access the full interview on “Funds that Won.”
And don’t forget to check out more articles like this on the Fund Launch Blog! Also, visit Fund Launch if you want help starting or scaling your own investment fund!
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DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the authors.
