The Cockroach Portfolio | The Acquirer's Multiple®

During their recent episode, Taylor, Carlisle, and Buck discussed The Cockroach Portfolio, here’s an excerpt from the episode:

Jason: Exactly. No lube. So, basically, my partner, Taylor Pearson and I built exactly what we wanted for ourselves and our families, and then we just opened it up to outside investors. But the idea with a cockroach is it can survive anything. People think they have broad portfolio diversification when they look at that pie chart, but usually, it’s just purely offensive assets. And then we see in March 2020, correlations go to one, everything goes down together. That shows them that they’re really just long GDP and offensive assets.

So, what we wanted to really bring to market was specializing in the defensive side. And on the defensive side, we used long volatility, tail risk, commodity trend advisors, etc. And the idea is pairing offense and defense will win investing championships over the long run and help you compound portfolios to maximize your log wealth, because you’re reducing that volatility tax or that drawdowns that can make you do stupid things.

So, we like to pair offense plus defense, and then we use Harry Browne’s four-quadrant model that goes back to the 1970s. They’re on the axis’ of growth and inflation, where they’re in growth or recession, inflation or deflation. It’s kind of a Venn diagram, they overlap. But the idea there is that’s the global four macro quadrants that we want to cover and overlay those with offensive defense. And then hopefully, our portfolio muddles along in any macro environment. And like Toby said, it’s cockroach. What survives everything, roaches. Always cockroaches.

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