SWI's Framework - Buying New Businesses
Using the 20th and 21st SW Pick as examples. Why and how I buy in new companies to ensure sleeping well.
Hi everyone,
New companies often excite investors the most. However, it requires a steeper learning curve. Balancing between ‘excitement’ and ‘discipline portfolio management’ is key to participating in the upside while limiting potential mistakes.
Today, I would like to share my buying strategy for new picks. Using the 20th and 21st picks as examples, I discuss
(i) Why am I buying them
(ii) How am I buying them
I have completed the initial portion (3% allocation each), and I will explain my thought process for approaching the next two portions (5-6% total).
Links to the deep dives and the first purchases are below:
20th pick - a supply chain network leader [deep dive, first buy]
21st pick - a public safety SaaS leader [deep dive, first buy]
First, preparation is everything
Buying is easy.
The caveat is that you must ensure the business you buy has a high likelihood of being correct.
At Sleep Well Investments, our first aim is not to lose. Hence, we only
Study winners, 21 so far.
Own them, 12 so far (see below)
Sell when we find better opportunities, 4 so far. (see portfolio updates)
To maintain a clean record since Oct 2023 (24/26 transactions are green), we prep, prep, prep, on a few critical things.
Prep by focusing on what matters most: key customers, key competition, solutions to past failures, and direction of the industry.
Prep by following where value is created (not charts!). It often takes a few quarters to fully understand what KPIs drive the business and how they fare relative to the competition.
That sounds like a lot of work, but it becomes easier with practice and a sense of ownership.
But as always, when the prep work does not yield the desired results, we acknowledge our failures and sell, so far, four times, and all of these decisions have been correct.
Ok, how do we buy new picks?
For businesses we haven’t owned for years, we prefer to remain conservative, splitting our buys into stages and limiting their allocation so that it doesn’t harm the portfolio or harm your returns.
First buy: a 2-3% position. No timing, if we are happy to own the business for 10 years, we buy when prices are reasonable.
Second buy: another 2-3% position if the following few public announcements are what we expected and prices remain reasonable.
Third buy: another 2-3% to take advantage of the market volatility (broad market sell-offs) when prices are at the cheap end.
This is a more patient and conservative approach. We did that with Wisetech (first buy, second buy) and Sea Limited (first buy, second buy, third buy), and are doing the same with the 20th and 21st pick.
Wisetech (first buy Feb 2025, second buy Mar 2025)
Sea Limited (first buy Jun 2024, second buy Mar 2025, third buy Apr 2025)
20th pick (first buy Jun 2025)
21st pick (first buy Jun 2025)
Above, buying in stages allows us time to reflect and bet bigger if the thesis works out (SE, WTC) or retract and limit the losses if they don’t achieve the KPIs we expect. Finally, if they disappoint (or we need the cash to pursue better opportunities), then we must be prepared to cut the position (FND, MEDI, WSC).
20th and 21st sleep well - second and third buy
Buying strategy:
First bought in June 2025, the price paid was 26x EV/FCF and 38x EV/FCF, respectively.
The next buy will be decided around Q2 results announcement (August 14th), provided the thesis and price remain attractive.
The final buy is reserved for when Mr. Market throws a discount.