Charting the Perfect Course

Charting the Perfect Course: Mark Hillman’s Journey to Sustainable Competitive Advantage

By John Harline

There is something poetic about sailing on a boundless sea.  Carried by rhythmic currents to a charted destination, yet vulnerable to the unruliness of a vast and intemperate ocean.  I suppose it is the challenge that drives those who find exhilaration in this sport.  Navigating unpredictable shifts and brazen tides only strengthens the resolve of those who are passionate about sailing.  For Mark Hillman, president and founder of Hillman Capital Management, sailing has always been an insatiable passion, driven by his love of challenges.

The passion was born early; Hillman fondly reflects upon summer camp sailing competitions in North Carolina, where he was compelled to return year after year to lead the regatta of Sunfish and Lightning sailboats in the camp fleet.  “I vividly remember the counselors standing before the entire mess hall, presenting medals to the campers who had won races during the week and I wanted nothing more than to beat all those guys in a race.”  It was this drive that allowed Hillman to do just that. As his collection of shiny medals grew at the close of each summer session, so did his desire to continue training in the sport he loved.

Although Hillman admits that he was not raised in an environment that many sailors grow up in, nor did he train in the yacht club juniors programs that many of his peers enjoyed, he did work hard to achieve excellence in the sport.   He chose to attend Tufts University, an institution known for its academics and renowned for its sailing program, because it had one of the best sailing teams in the country.  “I knew that a lot of the kids who had grown up racing competitively at the national and international levels were sailing for Tufts, so I wanted to go there and learn from them,” says Hillman.   What followed was a relentless outpouring of energy into a rigorous training schedule where he found himself toe-to-toe with world-class athletes.  “The truth is, in college sailing, you really shouldn’t weigh much more than 140 pounds to be competitive.   I was 6’1” and starving myself, I weighed 180 pounds, so everything about my training was a challenge.  But, at that level of competition, my only goal was to learn how to beat those guys every single day in practice,” says Hillman.  By his senior year, the hard work was paying off, as he achieved 9th place in a world championship, losing by only one point to the defending world champion.  “Going toe to toe with the best professional sailors in the world just added fuel to the fire,” he says.  “Sailing is a great sport, and one that you never really master.  Every time you go out there, it’s a new challenge.”

Much of what Hillman learned from sailing has carried over into his professional career.  Incidentally, it was only after family members and friends started pointing out that he might have a special gift for stocks, that Hillman began to see the parallels between his profession and his passion for sailing.   “My friends and family knew how my brain worked.  I personally didn’t know I would be good at stock picking, but the people who knew how I operated on a sailboat thought I would be good at investing and decided to give me a chance,” says Hillman, who speaks of his gift with humility.  “Everything I am good at is a result of that skill set, a rare combination of analytical and intuitive skills.  It is an interesting gift because it applies not only to investing, but to sailboat racing as well.  In sailing, you have currents, you have winds, you have shifts… you have all sorts of sea states.  These things are not necessarily correlated, but you have to boil them together into an action plan and then be able to tactically implement it.”

As Hillman sees it, picking stocks is not all that different.  “In assessing stocks, you have macroeconomic issues that come into play; there are companies that are in different sectors and in different industries; you have demographic changes and new technologies to consider; there are industries and products in different parts of their respective life cycles.    All of these disparate things need to be distilled together,” says Hillman.  “You must try to figure out what is going on with this one little company in the context of all of that.  Yet, that is sort of how I am wrapped and what enables me to pick stocks.  My basic intellectual gift is an ability to take disparate and often times, seemingly unrelated inputs and bring them together into some sort of intimate and related combination, and then create an actionable thesis out of those things.”

Hillman’s knack for implementing a unique skill set has assisted many investors for decades.  He founded Hillman Capital Management in 1998 and brought to the firm the assets of predecessor companies he established in the early 1990s, specifically, Custom Asset Management and Menocal Capital Management, where he was the Chief Investment Officer.  By 2006, Hillman’s Focused Advantage Portfolios outperformed the S&P 500 every year for a decade.  In the years that followed, Hillman expanded his firm at the request of larger intermediaries, which produced a period of under-performance.  This was a difficult time for Hillman and the organization; but in recent years, he has returned to the process that brought him success in the past by reducing his team and getting back to what he does best.  This return to his roots has improved performance and the process by which he picks companies.

While Hillman has successfully navigated his ascent to success, he has also managed to refine the qualities that have given him a competitive edge in the industry.  He contends that the investment business is a demanding creature that causes one to remain constantly observant.  “In this business, the very moment you begin to believe in yourself, you start to get into trouble.  You must be driven by self-doubt at all times, just to keep that fire underneath you.”

Hillman has successfully managed to keep that fire lit, and has drawn a unique perspective from his own life experiences.  “In everything you do in life, you can’t help but bring in all of your life’s background and baggage, both positive and negative, because this ultimately makes you who you are intellectually,” he says.  “One of the reasons that I came to understand competitive edge really well is that I grew up in a family of retailers.  They owned a chain of retail drugstores and general merchandise stores that were completely squashed by the large chains in the 1980’s.  I saw what a lack of competitive advantage could do and it gave me a great understanding of the importance of having that combination of pricing power, purchasing power, barriers to entry, and all those basic Porter-model (threat of new entrants, threat of substitutes) inputs that everyone learns in business school.  What one might read in “Competitive Strategy” by Michael Porter, I was seeing in real life,” recalls Hillman.

Throughout his career, Hillman has uniquely implemented these life lessons into how he approaches business and has gleaned beneficial lessons from mentors along the way.  “When I think about how I look at the world, I think it is one-third Warren Buffet, one-third Peter Lynch, and one-third Mario Gabelli, and hopefully, the better parts of each of those,” he says.  “Warren Buffett talks about buying great companies at fair prices.  I like the great companies part, but I don’t like the fair prices part.  I believe in buying stocks that are dramatically undervalued.  That is, those stocks that are priced at better than fair prices,” explains Hillman.    “As for Peter Lynch, he emphasized understanding the product and ‘kicking the tires,’ so to speak.  I think this is extremely important.  Finally, Mario Gabelli, because of his focus on cash flows.  I think that is how you evaluate anything in the world, whether it’s a rental property or a REIT, or even a growth company.  The reason why you own anything as an investment is to receive cash flows.”

While Hillman acknowledges that there is a certain amount of risk that goes into being a focused stock picker, there is a great sense of satisfaction as well.  “I think it is naïve to think that anyone cannot be wrong that often; but, you have to take comfort in knowing that when you are right, you can be dramatically more right, than you are wrong in the times that you actually are wrong.  I think it is important to understand that,” he says.  “I get great comfort out of knowing that I am investing in great companies that really own a particular business segment.  I get great comfort in knowing that I am not willing to own them unless I believe them to be undervalued.”

True to form, in the late 1990’s, Hillman acted without hesitation when he sold his clients’ shares in a large computer hardware company because the company had become, in his estimation, overvalued.  “I had clients who were incredibly annoyed with me for selling this company because they loved that stock. There is no comfort in knowing that you own an overvalued security,” he says.  “It is about common sense.  If you know you own great companies and you only own them when they are cheap, long term, there is not a lot to be afraid of.”

Hillman explains that this is much easier said than done and readily acknowledges, “Most people do not have the constitution to see that through.  A lot of people ask why I don’t have stop losses?  Well, I think having stop losses is completely contrary to what I believe in.   If you really believe in a company, and granted you wish you had made your first purchase at the lowest price, but when a stock is down, it is a good opportunity to buy more if you still believe in the valuation story and the competitive advantage story.  That’s hard for people because everyone thinks you must have stop losses, and ‘don’t fight the tape,’ but you must think about what something is really worth and have a very long-term perspective to get through the difficult times.”

In assessing his own constitution, Hillman describes his visceral ability to find order in times of stress and chaos.  “It is just a part of who I am,” he explains.  “When things are hectic and frightening with respect to a stock, everything for me becomes slow motion, and I see things very clearly.  For a really good hitter in baseball, the analogy is identical.  The pitch at a hundred miles per hour becomes frozen in time, and the seams on the baseball are in clear focus.”

Similarly, Hillman finds the same clarity while sailing, “When it is really windy and stormy, and a lot of boats are converging on a mark, and people are screaming and yelling, I actually become calmer, and I can see everything happening in slow motion.  The fear comes out of the equation.  I think it is just part of who I am.   Similarly, in the stock market, when other people are frightened and they are bailing out, I see an opportunity to make gains.  If they are selling a stock that I think has a great future, there is a tactical opportunity to buy a stock that has become cheap for short term or for non-recurring reasons.  I don’t see fear; I see opportunity.  That’s just how I’m built.”

Hillman stresses that being dispassionate about a stock is a good rule of thumb, and declares chidingly, “don’t fall in love with your stocks because they don’t know that you own them.”  Similarly, Hillman suggests that it is important to be dispassionate about certain decisions.  “Intellectual honesty is preferable to being prideful.  You must be able to be dispassionate about the decisions that you have made because things change from your original thesis.  You have to be willing to accept that your original thesis may be wrong.”

Such was the case in 2002, when Hillman bought stock in a major automobile company.  Later in the year, he began noticing that cars within similar price ranges all started looking the same.  In fact, without looking at a car’s nameplate, one would not necessarily be able to discern the identity of the car’s manufacturer.  “A commoditization had occurred.  Not only were the cars starting to look the same, they handled the same, and they were priced the same.  Commoditization is not a good thing when you are looking for companies with a competitive advantage,” says Hillman.

In his assessment, Hillman considered the possibility that the company might potentially emerge as a different type of leader.  “I explored the idea that perhaps this company might become an industry leader through customer loyalty or through cost advantage, or even price advantage.  However, it appeared that none of this was happening at the time.  If you looked at the company’s financial statements, the one thing that stood out was that their retiree health care cost per vehicle was $800 and that the future of that number was unquantifiable.  I then looked at a competitor, who actually had become known for excellent customer loyalty, and they didn’t have a number anywhere near that.  Clearly, my original thesis on this company was not good.  They did not have a sustainable competitive advantage and it was time to get out of that stock.”

In this case, Hillman’s decision to sell the position at a loss turned out to be a powerful lesson.  “I think that this is a good example of being dispassionate and being able to accept the fact that your original assessment is not always right.  It is also an example of doing the right thing about a company after realizing it does not have a sustainable competitive advantage.  It wasn’t that the valuation looked bad at the time, but when a company doesn’t have a sustainable competitive advantage, you can’t really make accurate earnings projections, because you really have no idea what is going to happen to their sales.  The colloquialism ‘garbage in, garbage out’ applies.” Hillman explains.  “When a stock is no longer qualified for investment because the company does not have sustainable competitive advantage, we don’t care if it appears to be overvalued or undervalued, or if we made money or lost money, or if it just went sideways.  We just have to get out of it because it is not the type of company that we care to own.”

It is this keen sense for business that has solidified Hillman as a respected force in the industry.  Despite the unpredictability of the economic landscape over the last fifteen years, Hillman has managed to maintain the consistency of his investment process and thesis.  The era of volatility has only deepened his resolve to persevere.  “Even though I don’t think I learned anything new about what kind of companies to invest in or how to assess what is good about a company or how to value a company, I do feel that this period of time has deepened my sense of conviction,” says Hillman.  “I went through a process of looking at how I operated as an investor from 1996 through 2005, and determined that it was an effective use of my skill set to do what I do, and to do it well.”

Critics may suggest that if great things can be accomplished with one good mind, then even greater things can be accomplished with a group of good minds.  Hillman does not necessarily prescribe to this theory.  “Maybe this isn’t a new thought for a lot of people, but doing things by committee tends to not work very well,” he says.   “I am a person who loves challenges.  In fact, I am a person who lives for challenges… intellectual challenges, physical challenges, athletic challenges, that’s what makes me tick.  When institutional investors told me that I had to build an investment team to replicate how I’ve performed on my own, that made me say, ‘Now there’s a challenge!’  Despite an earnest effort, I learned that this is not always possible.  Despite intuitively understanding the futility of the proposition, I tried to deliver.  I learned that no matter how much you love a challenge, you cannot be Don Quixote.  You must pick your battles in life, and in investing, and not take on things that seem impossible, because they probably are.”

Tapping into his individualized skill set and love of challenges has always come as second nature to Hillman.  He has successfully balanced the demands of a burgeoning career with his steadfast commitment to world-class, competitive-level sailboat racing.  In 1995, Hillman and his wife, moved to Annapolis from Boston.  They started racing competitively in the local fleet with their sights set on winning the Chesapeake Bay High Point Championship for their boat class.  As would be expected, since one of Hillman’s mentors had won the competition three years in a row, Hillman was determined to win the same competition no less than four years in a row.  The challenge was set, and the husband and wife team took first place for the first two years.  By the third year, not only was the team well on its way to a three peat, but also they had qualified to sail in the 1998 World Championship in San Francisco.

The trip west proved very educational.  Hillman realized that the victories in Annapolis had been pyrrhic, at best, as they placed 32nd in the World Championship.  However, the stage was immediately set for his next challenge.  Hillman’s quest would involve a new training regimen that would project him to the top.

Following San Francisco, the family abandoned their dream of winning the Chesapeake Bay High Point championship 4 years in a row, and headed to Newport, Rhode Island for the North American Championship.  Hillman trained alongside the best sailors in the world.  It paid off.  “I started seeing and learning from the best.  I learned how to emulate what they were doing and how to then leapfrog past them,” says Hillman.  “Since I was building my business and a family at the time, I didn’t have the time or the money to keep competing at that level, but I never gave up.   I just kept building upon my skill set and by 2007, I placed third in the World Championship.”

In the following year, Hillman led the World Championship going into the final day of competition, but ended the regatta in 6th place.  Considering he was the rare non-professional sailor to place in these events, Hillman was pleased with his team’s performance, but not satisfied.  “These professional sailors do this all the time; they do this for a living.  I always push myself to do what it takes to fairly and honestly achieve the results,” says Hillman.  “Whether it’s in sailing, or investing, I do whatever it takes to ethically succeed.”

Beyond creating a name for himself at the World Championship level, Hillman’s unique skill set has been heralded in the private racing world.  Pierre DuPont, the former Governor of Delaware and a 1988 Republican Presidential candidate, asked Hillman to accompany him to the coveted Key West Race Week as a tactician on DuPont’s One-Design 35 racing boat.  “A tactician helps the crew achieve its tactical plan en route to its strategic plan,” explains Hillman.  “He observes a combination of many different things at once and makes sense out of them.  As a tactician, I am standing at the back of the boat, looking at the racecourse and at whatever weather patterns look to be developing.  I am assessing the sea state, looking at the currents and whether they are changing.  I stand right next to the boat owner, by its helmsman, and talk about where to go big picture while coaching him on what to do small picture.”

Hillman recalls being the only amateur tactician in the fleet of elite vessels; yet, humbly insists that he was hired not for his outstanding abilities, but because he was an amateur (which would allow an owner one additional spot on the vessel to fill with a professional crew member).  Nevertheless, DuPont’s boat, with Hillman’s expert assistance, won Key West Race Week.

Hillman’s ability as a tactician has indeed overlapped into his professional life.  He is frequently sought after for investment advice and is often asked about how he screens stocks and from where he derives investment ideas.  His answer is simple.  Living in a changing economy has caused him to become more observant of investment opportunities that exist, virtually, everywhere.  “If you are fortunate to live in this country, you are also unfortunate enough to be bombarded by commerce every second of your life, everywhere you go.  If you do what we do for a living, that’s a blessing, because everywhere you look, there are investment opportunities, both good and bad,” he reflects.  “If you ask me what I have learned in the last 30 years, the answer is that I have been living, breathing and eating in this economy for all that time, and it’s given me that much more experience and a clearer understanding of how the world works, how it is evolving and what the demographic trends are.  The more experience you have, the more equipped you are to understand things better.  I just think I’ve gained a lot more knowledge about the economy and about companies by being observant.  It’s a virtuous cycle — the more you learn about something, the more you can leverage that into learning about something else.  We are not born with infinite knowledge, although some people think we are, but I think in this particular case, that is not true.  It is simply a function of building upon your knowledge base, on top of things you already know, and becoming more aware of different parts of the economy and how they impact each other.”

The role of emerging technology has also impacted the way Hillman observes stocks and how he runs his business.  After leaving Shearson, Lehman, Hutton in 1990, he started as a small independent advisor and decided to jumpstart his analytical thinking by taking a Harvard Extension course in C-Language Programming.  From that knowledge, Hillman built a portfolio management system from scratch using C-language, and a program based upon the strategy outlined in Martin Zweig’s book, Winning on Wall Street.  Ultimately, this experience taught Hillman that in order to run a business efficiently, it is much wiser to utilize and leverage technology that other people have developed to make things easier.  “Understanding technology is important and you have to be a user,” he says.  “Running a business helps you understand business better.  For people who have been in the investment business for their whole lives, and have never run a business, I think they are potentially missing something in their ability to analyze companies.  If you are an actor in the real economy, I think it helps you understand businesses better when you analyze them.  If you’ve gone from your MBA program to being an analyst at a mutual fund company, to being a portfolio manager, you’ve really never been engaged in the actual business community.”

Upon reflection, Hillman’s victories in the investing world and certainly, while sailing, have always been about the lessons he has learned about himself along the way.  “I suppose these successes validate that I have a skill set which I can apply to two different areas in my life,” he says.  “It is just a reminder that relying on a combination of analytical and intuitive skills simply helps me build upon the confidence that helps me to persevere in portfolio management.”

Likewise, Hillman has gained great knowledge from the failures he’s encountered on his journey.  “My biggest failure was that I was not able to build a team that could replicate how I manage money,” he says.  “Clearly, I have to say that nothing turns me on like making money for other people.  The social value there is huge.  That’s why nothing hurts more than knowing that over that period of time, when everyone on the investment team had to feel important and have their fingers in how we invested, this potentially reduced my clients’ ability to make the positive returns To me, that’s a big failure.  This is in no way an indictment of the intellectual prowess and work ethic of the wonderful people that I worked with.  They are all quite capable, but the committee process just doesn’t work for me.”

As expected, Hillman turned this into a learning experience and resolved that managing money by committee is not a way to make money for people.  “You need an individual who has that unique combination of analytical and intuitive skills, combined with discipline, to achieve exceptional results,” says Hillman.  “Since people have the ability to index everyday and not pay people like us management fees, they don’t need us unless we can add value for them.  My highest and best use is to use my unique, intellectual skills to make money for people.”

That’s where Hillman’s star shines brightest.  For example, he has owned Apple for a number of years.  At first blush, this is a success story.  According to Hillman however, the stock made a lot more money for people in the few years before he made his initial purchase.  “If you know how I look at the world, I emphasize a company’s sustainable competitive advantage.  At the time, I was looking at Apple, and comparing it to what we all learned from Sony and its Betamax experiment,” he says.  “Betamax, a competitor to VHS tapes, was a Proprietary platform which allowed people to record and watch movies, but since they could not use them on any other platform, it was doomed to fail.   I saw parallels with Apple and what it was doing with the iPod previous to 2010, and thought nobody would ever buy into that ecosystem either:  Why would anyone buy an album from somebody at full price as if it was owned outright, when in fact, it was only being rented because it could not be used on any other system?  To me, this made no sense.  Since Betamax had failed, I thought iTunes was going to fail too.”

However, Hillman held steady and keenly observed that Apple’s course would not take the same path as that of Sony.  “People bought into Apple by the score despite the fact that it did not seem to make any sense,” he says.  “When Apple followed up with the iPhone, people bought into that by the score too.  Then people started buying more laptops and notebooks from Apple because everything had to be on the same ecosystem.  Once the ecosystem had been completely built out and there were throngs of people on it, this led to higher switching costs.  Yet, people remained steadfast and their loyalty to Apple and its brand continues to surge ahead.”  Even though Hillman’s purchase of Apple created great gains for his clients, he still readily admits that he did not expect it to reach the pinnacle it has attained.  “Apple has become the type of company that has sustainable competitive advantage that I didn’t believe it would become,” he says.  “Yet, this is a story that I feel really good about.  I realized that the ecosystem worked and see that there are still a lot of things Apple can do to layer onto the success it has created.   There is a lot more money to be made if Apple continues to cement its customer loyalty and to reap all the economic profit and pricing power that comes with that customer loyalty.”

Such is Hillman’s passion — an extraordinary zest for finding opportunity in investments that make people money.  As Hillman explains, there are certain things that highlight how he looks at the world and how he invests.  “One thing I do is go to where people shop and I watch them.  I do this, not to be creepy, but to understand how consumers operate.”   In the nineties, Hillman began looking at the growing popularity of cell phones and started to take a closer look at how Verizon operated.  “One thing about Verizon in the 1990’s, and probably still today, is that their network was just more reliable and their customer service was better than the competition,” he says.  Hillman also started reading about the technology that Verizon was using and discovered that CDMA (Code Division Multiple Access) technology was far superior to the other TDMA (Time Division Multiple Access) and GSM (Global System for Mobiles) technologies used by Verizon’s competitors.  Hillman also learned that Qualcomm owned the CDMA technology patents and that Verizon was necessarily committed to buying from Qualcomm, in order to build out its nationwide network.  This proved to be lucrative for Hillman and his clients, because he realized that this was just another example of sustainable competitive advantage that Qualcomm possessed.   “Sustainable competitive advantage does not necessarily exist only in large companies which are already large-cap,” he says.  “Qualcomm is an example of a smaller company that couldn’t help but grow because of its patents and competitive positioning.

The Verizon / Qualcomm interplay is illustrative for another reason: “Companies that are excellent have concentric rings of excellence around them,” says Hillman.   “If a company is excellent, then companies that supply to them have to be excellent, and companies that provide services to them have to be excellent.  Likewise, if they are providing a service to another company, that is providing something else to customers, then the buyer of their products could also be.“   In this case, Hillman looked at the concentric rings of excellence surrounding Qualcomm, through Verizon, and made a successful decision.

“A lot of people have a hard time understanding how a small portfolio management shop, without a big research team, can find investment ideas,” says Hillman.  “A lot of it has to do with identifying concentric rings of excellence which surround excellent companies, and part of it is an ‘eyes wide open’ approach.”  Hillman recalls that between 1993 and 1998, his business dealings would require him to spend a weekend of every month in New York.  “I remember that I was looking at Fed Ex and UPS at the time,” Hillman explains.  “While in the city, I noticed an interesting thing; every time I would see a FedEx driver, I’d see them running in and out of the buildings, really getting after it with no down time… and then I would see a dozen UPS drivers hanging out on the same corner, chatting with each other and smoking cigarettes.  I knew exactly which company to bet on.”

Another revealing factor in assessing potential investments is looking at the corporate culture that surrounds a business.  While Hillman recognizes that a company’s sustainable competitive advantage is created by various factors, there are those businesses that excel, in large part, because they are led by a remarkable corporate culture.  A perfect example: Starbucks.  “You just know that Starbucks is a strong enterprise and that they are a leader in their space,” says Hillman.  “It’s easy to say that Starbucks has sustainable competitive advantage because they’ve been able to raise their prices, and increase their volume, and they don’t lose customers.  However, when I read people’s research about this company, I just don’t think anyone gets why they have sustainable competitive advantage.”  Hillman suggests that it is not based on Starbuck’s purchasing power.  “Even though they might have good relationships with coffee growers all over the world, they actually pay a higher price to secure that supply,” says Hillman.  The question remains: Why does Starbucks have this pricing power and how are they able to keep growing their sales and their customer base?   “It is just the corporate culture,” Hillman states.  “How can a retail company with that many outlets, consistently (maybe not 100%, but at least 95% of the time) have people who make you feel important when you walk into their store and that you share community with them?  That’s what it’s all about.  I mean the product is good, but it’s not a world-beating product.  Yet, I never see that in the analysis of Starbucks — that is, the culture that they have been able to sustain despite scale.  It just has to do with the people that run it and who they are.  It is remarkable to me.”

Hillman is often asked to assess emerging businesses such as social media outlets and home shopping businesses.  Generally speaking, Hillman sees them as revenue-generating entities.  “A company such as Amazon is a sustainable business and I think it will continue to reap the benefits of a lot of the capital investments that it has made in infrastructure,” says Hillman.   “I think they are going to be around for a long time and they are going to make money.  Amazon is a smart retailer, which is run by smart people.  They just lose money from time to time when they are investing in their infrastructure; and end up reaping the benefits later.  I think it is a great company that will be around for a long time and they are going to be profitable.  We own Amazon now and I’m a believer in that.”

Hillman is also a believer in EBay, because it has a following among people who like bargains.  “EBay appeals to those who like the feeling of buying in that kind of marketplace. Ebay has the first-mover advantage.  This is a tough business, but EBay is a strong leader in this niche who will be around for a long time.”

As for social media, Hillman states that there is some trepidation when dealing with businesses that are trendy.  “The problem with social media products is that there’s always going to be a new one, a hot one, a trendy one and quite possibly, the new, hot and trendy ones don’t have advertising thrown in the face of the users, and that’s why they’re new, hot and trendy,” says Hillman.  While up-and-coming social media outlets might have a novel way of looking at things or sharing photos or broadcasting information, Hillman does not see them as ideal businesses for long-term investments.  “Maybe I’ll be wrong with some of them, just like I was wrong early on with Apple, but I’m okay with that.  Facebook is probably one of the best social media companies out there.  If they make money, their advertising revenues keep growing, but for how long?  At what point do those who use the platform tire of the advertising and find something that is more fun and interesting and then jump onto that bandwagon for a few years.  I think these are companies where if you can make money on them as an owner, and you should just milk that profit because it is going to go away at some point.  As a long-term sustainable enterprise, I just don’t see it.”

As is evident, Hillman’s keen sense for being observant is part of what makes him successful.  He is constantly driven to seek and conquer a challenge, which is a solid part of his core.  Hillman has achieved a level of success attained by few, but as is noticeably apparent, remains remarkably humble when asked to discuss his many triumphs.  For now, Hillman will continue to observe the economic landscape, just as he assesses the currents of the untamed sea.  In both instances, his resolve to chart a perfect course remains intact.

Past performance is not indicative of future results.  The information provided in this report should not be considered a recommendation to purchase or sell any particular security.  Hillman Capital Management reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.  There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings.  It should not be assumed that any of the securities transactions, holdings or sectors discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein.
Hillman Capital Management, Inc. is a registered investment advisor. More information about the about the advisor including its investment strategies and objectives can be obtained by visiting The firm maintains a complete list and description of composites including fully compliant performance information, which is available upon request.  HCM-15-27

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