Exclusive Interview with Cook & Bynum

We are pleased to bring you the following interview with Richard Cook and Scott Bynum the principals of Cook & Bynum Capital Management, founded in 2001 and based in Birmingham, Alabama. The firm makes concentrated investments in undervalued businesses across the globe.

Richard Cook co-founded Cook & Bynum Capital Management in 2001. Before forming the firm, he worked for Tudor Investment Corporation in Greenwich, Connecticut. Richard attended Hampden-Sydney College where he graduated summa cum laude in three years with a B.S. in Mathematics, Applied Mathematics, and Economics and was a member of Phi Beta Kappa. Richard serves on the Board of Trustees of Hampden-Sydney.

Dowe Bynum co-founded Cook & Bynum Capital Management in 2001. Before forming the firm, he worked as an analyst in the Equities Division of Goldman, Sachs & Co., Inc. in New York. Dowe attended Princeton University where he graduated with a B.S.E. in Operations Research & Financial Engineering and a Certificate in Finance. Dowe serves on the Glenwood Board of Directors & Advisors and is also a member of the Mountain Brook City Schools Foundation Board.

MOI Global: Please tell us about your background and the genesis of your firm. What motivated you to set up your own firm and how did you decide on The Cook & Bynum Fund as the optimal investment vehicle?

Richard Cook & Scott Bynum: We have been friends since before pre-school, and we developed a mutual interest in the stock market in elementary school. Richard began managing a small investment account in third grade when his parents gave him five shares of five stocks. In fifth grade, one of our teachers further encouraged our interest by enrolling us in the national high school stock market game, which we won by nothing but pure luck. Various business books were always interesting to us, but in our junior year of high school, we discovered Roger Lowenstein’s biography of Warren Buffett, and — as Buffett describes it — the value investing inoculation took immediately. We started reading everything related to the subject that we could get our hands on, starting with The Intelligent Investor, Security Analysis, and The Theory of Investment Value. Richard ended up moving his final exams to attend his first Berkshire meeting at the end of his freshman year of college. It became obvious to us that this Ben Graham approach as modified by Warren Buffett and Charlie Munger was the right framework for investing. We had found our calling.

We attempted to open a mutual fund during college, even hand-writing a prospectus, only to find that the regulatory costs were going to make it impossible with the $200,000 we had committed from friends and family. After college, Richard worked at Tudor Investments and Dowe worked at Goldman Sachs. We had valuable experiences in both places, but even before joining these firms, we knew we would not be able to invest in a concentrated value style while there. So the first chance we had to start our firm, we went for it. We were both only 23 when we started managing outside money, and it gave us the opportunity to set our own mandate. We have had so much fun trying to understand our world a little better every day.

Since 2001, we have invested money for private accounts. As our business grew, we wanted to be able to offer the same product we were providing in private accounts to a broader group of investors. Because our strategy is long-only and eschews leverage, it is a nice fit for a mutual fund structure. The Cook & Bynum Fund launched in July 2009 with lower minimums, daily NAV pricing, and SEC registration. We apply the exact same strategy in the mutual fund and our private accounts, as we designed its mandate specifically to parallel the private side. We have been happy that The Cook & Bynum Fund has achieved our goal of expanding our accessibility.

MOI: When it comes to stock selection, your criteria include circle of competence, business, people, and price. What types of businesses have you favored historically and why?

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