Many prospective investors have asked about SAM return targets, and the short answer is, we don’t have them. If someone tells us what the S&P 500 returns over a specific period of time, we can reply with a range of what we would consider to be an acceptable return for SAM over the same period. For example, in 2008, the S&P 500 lost nearly 40%.  During that year, anyone who broke even or even lost only a single digit percent of their invested capital deserves, in our view, a hero’s medal.

Conversely, in 2009 the S&P 500 returned about 33%.  That year, breaking even would have been a disappointment.  Although we’ve used the years 2008 and 2009 as examples here because they were memorable years for many investors, we ourselves assess our performance over three to five year intervals, and would encourage our clients to do the same.

Think of it this way: If you owned and managed a business, would you shut it down based on a single year’s results?  Maybe, if the results were truly awful and threatened to bankrupt the entity.  But most entrepreneurs would look through any given year, and judge the performance of their business over at least three years if not five.  It generally requires that length of time to separate signal from noise, and to assess to whether a business can live up to its promise or is instead destined for mediocrity or failure.  We seek to apply a similar mindset to the businesses we invest in through their shares or debt.