Conservative Winter Investment Strategy

Andrew Wilkinson shares his conservative approach to preparing for economic uncertainty ("winter"), emphasizing stress testing businesses and maintaining strong cash positions while seeking specific types of investment opportunities.

Key Strategy Points:

• Business Stress Testing:

  • Model revenue drops of 20%, 50%, 70%
  • Examine ability to handle late customer payments (90-120 days)
  • Review ability to lay off people if needed
  • Evaluate long-term contracts and lease commitments
  • Assess debt payment capabilities

• Cash Management:

  • Keeping substantial cash reserves
  • Moving excess cash to head office
  • Currently holding mostly treasury bills
  • Split personal portfolio between cash and Pershing Square Holdings

• Investment Approach During Uncertainty:

  • Avoiding "crazy venture bets"
  • Focus on secondary and minority buyouts
  • Looking for non-binary deals with flexible valuations
  • Seeking structured deals with guaranteed returns (15% in liquidation/dividends)
  • Targeting "default alive" businesses that don't require additional funding

• Risk Management:

  • Using put options as "insurance policies"
  • Locking in debt at fixed rates for certainty
  • Preferring certainty over optimal rates
  • Looking for businesses that can pay back investment in 2-5 years

• Opportunity Preparation:

  • Building "elephant gun" ready for big acquisitions
  • Looking for businesses with 20-30% earnings yield
  • Waiting for panic selling opportunities
  • Maintaining liquidity to capitalize on market conditions

• Personal Investment Philosophy:

  • Playing "poker" not "roulette" with investments
  • Focusing on businesses over real estate
  • Avoiding illiquid assets
  • Maintaining strong cash positions for opportunities