What I Believe About Investing
My practical investment philosophy
Last week, I realized something: I’ve never actually shared my investment philosophy here on Summit Stocks.
And to be clear—this isn’t a set of principles I follow perfectly. It’s something I try to uphold. My approach evolves as I compound knowledge, and I don’t expect that to stop. There’s no definitive, fixed philosophy.
Over the years, I’ve consistently focused on what I call “high-quality” businesses. But I’ve never clearly explained why or how.
This is my attempt to do just that.
Why Do We Invest?
At its core, investing is about turning money into more money. We buy shares of a business to earn a share of its future profits. Simple enough.
The value of a stock, then, is the present value of all future cash flows. If there’s one idea worth remembering, it’s that.
The looming problem is that no one knows the future. If we did, the market would already price it in and there’d be no room for outperformance.
So investing becomes the practice of comparing what the market expects, which is baked into the stock price, with the company’s actual fundamentals.
Expectations vs. Fundamentals
Every stock price reflects a set of assumptions about the future.
The investor’s job is to assess whether those assumptions are too high, too low, or roughly fair.
Expectations are high in high-quality businesses, and low in low-quality ones. Obviously. You can see this most clearly in basic valuation ratios like the P/E: high-quality names trade at higher multiples, and vice versa.
The opportunity lies in finding great businesses where expectations have temporarily drifted below fundamentals: where the market is mispricing long-term potential.
That’s where I try to focus. I stick to high-quality businesses because their fundamentals are more stable, and I sleep better owning them. But I only want to buy when the market is unjustifiably pessimistic.
Why Do Mispricings Happen?
The stock market is not perfectly rational. It’s driven by buyers and sellers who are ruled by emotion, narrative, fear, greed, and noise.
Temporary dislocations happen all the time: misunderstood earnings, negative headlines, sector-wide pessimism. These moments create disconnects between price and fundamentals.
My goal is to identify when a great business is being priced like a mediocre one.
Concentration and Patience
I don’t hold a diversified basket of “pretty good” ideas. I prefer a concentrated portfolio of businesses I understand deeply and fully believe in. My largest position is nearly 30% of my portfolio.
Few bets, but big bets.
I pass on most opportunities and wait. But when a great business is mispriced, I want to act decisively. With my most recent purchase, I didn’t hesitate, but went straight into a full position. So far, it’s paid off.
Everyone—including me—feels pressure to “do something” all the time. But more often than not, the best move is to do nothing.
Embracing Simplicity
Wall Street thrives on noise. It makes money by creating complexity. The more you read, the more confused you become, and the more you stray from what really matters: the business itself.
But great investing is about simplifying.
I’ve fallen into the trap of overengineering models—projecting cash flows to the penny, adjusting discount rates, capitalizing expenses, building 30-year forecasts. Such concepts are useful and important to understand, but rarely useful to apply consistently.
These days, I focus on what matters: the core drivers of the business, and the price I’m paying relative to expectations.
In Summary
This philosophy isn’t a checklist I’ve mastered, but a direction I try to orient myself toward:
Identify high-quality businesses.
Wait for the market to misprice them.
Act with conviction when it does.
Ignore the noise.
Keep it simple.
I won’t always get it right, and haven’t always gotten it right. But this is what I believe investors should strive for.
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Disclaimer: the information provided is for informational purposes only and should not be considered as financial advice. I am not a financial advisor, and nothing on this platform should be construed as personalized financial advice. All investment decisions should be made based on your own research.
I respect your approach and thoughts!
Very simple and precise! Great post here, Lucas.