Karin Anderson: Obviously, you've been running the portfolio for over 20 years. You've seen downturns before. What were some of the key takeaways this time around--lessons learned?
Jeff Cardon: Well, lessons learned. I mean, there's been a lot of lessons learned over the 30 years. The thing that strikes me the most is... We have something that we call the graveyard, which are the companies that we've really goofed up on, because it's really worth going through that graveyard to see what lessons are learned in the graveyard. And the thing that's so fascinating to me is, that graveyard, the bodies kind of look all the same. For some reason, maybe, you were more focused on valuation for some reason, or somebody convinced me that this company is better than I thought it was. Or maybe we just made a mistake and it wasn't as good.
But the mistakes you make in small-cap growth investing are always buying bad companies, as opposed to paying too much for them. And we've been in periods, like the Internet bubble, where valuation mistakes were out there. But we didn't make them, because we just never saw the value in the business franchises.
And so the lessons of '08 to me are the lessons of '01 and the lessons of every other recession that we've been through. And that is, if you lose your focus on quality, you're really going to get your head handed to you when things fall apart.
I think at a really high level you wish you could have seen this coming. We're classic bottom-up stock picking investors, and so we didn't see it coming. I wish we had the skills to do that. But this is a little bit of twisted logic, but people who obsess about the top-down, they missed it too.
And so when everything got really tough, we had a north star to look at. It's like, these companies are really good that we invest in. And so I think that's really helped us navigate through what's, of course, been a really hard time for our shareholders and for us, too.