Buying New Businesses: 20th & 21st Sleep Well Pick
Why and how I buy the latest 2 picks to ensure sleeping well.
Hi everyone,
I hope your summer is full of joy with loved ones.
Today, I would like to share some additional details about my buying strategy for new picks. Using the 20th and 21st picks as examples, I discuss
(i) Why am I buying them
(ii) How I am buying them
I have completed the initial portion (3% each), and I will explain my thought process for approaching the next two portions.
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.
However, 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.
Second, how do we buy new picks?
For businesses we haven’t owned for years, we prefer to stay humble and split our buys into stages, positioning them so that it doesn’t kill the portfolio.
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)
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.
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.