Professional Documents
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INVESTMENT PHILOSOPHY
Above all, we think vigilance towards risk is central to solid investment returns.
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INVESTMENT PHILOSOPH Y
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INVESTMENT PHILOSOPHY
[Speaking about Berkshire Hathaway growing from 10 million to 120 billion over 40 years] Success wasnt based on
hyperkinetic activity. It was achieved through nondiversification, a hell of a lot of patience, and intensely opportunistic
behavior on a few occasions If you took the top 15 decisions out, you would have a pretty modest record.
- Charlie Munger / Vice Chairman, Berkshire Hathaway
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INVESTMENT CRITERIA AND PROCESS
Our success depends on exercising patience and discipline to only invest in situations
that meet our criteria:
Total universe of publicly
traded companies.
Ability to understand the business: We focus on businesses
we thoroughly understand. This eliminates a significant number
of potential investments and results in Arlington owning many of
the same companies numerous times.
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PERFORMANCE
AVM Ranger, LP (as of 12/31/2014)
550%
30%
450%
25%
350%
20% 250%
15% 150%
85.0%
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10%
9.9%
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S&P 500 AVM Ranger
In July 2008, Arlington Value Capital launched AVM Ranger Fund, LP. AVM Ranger Fund, LP is our primary fund has generated a 37.9% annualized
return (before fees) and has outperformed the S&P 500 by approximately 28% per annum since inception.
1000% 1000%
595.1%
500% 500%
400% 400%
300% 300%
200% 200%
100% 100%
86.5%
11.7%
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AVM S&P 500 AVM AVM Ranger S&P 500
AVM Calendar Rtrns (since inception) Gross Net S&P 500 15-Year Combined Return* Gross Net S&P 500
2000 58.5% 58.5% 2 -8.4%
2001 42.4% 39.9% -11.8% Cumulative Return 1,898.7% 1,101.7% 86.5%
2002 -22.7% -24.6% -22.1% Annualized Return 22.1% 18.0% 4.2%
2003 56.6% 53.0% 28.7%
*Assumes client started with AVM and switched to AVM Ranger at funds
2004 21.1% 18.2% 10.9%
inception in July 2008
2005 -32.7% -34.4% 4.9%
2006 12.5% 9.8% 15.8%
2007 13.0% 10.3% 5.5%
Prior to AVM Ranger LP, Arlington Value Management LLC (AVM) was
2008 13.3% 10.6% -37.0%
2009 62.2% 58.4% 26.5% our primary fund. From mid 2008 through mid 2011, AVM and AVM
2010 23.4% 20.5% 15.1% Ranger were managed side by side. After Q2 2011, AVM LLC was merged into
2011 (Through June) 8.4% 7.1% 6.0% AVM Ranger LP. The above chart shows the combined returns since inception.
Annualized Return 18.4% 15.9% 1.0%
1 Performance reflects a December 23, 1999 inception
2 AVM LLC did not charge a fee until Q1 of 2001
7 *PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
PERFORMANCE
Top Performing Funds Since July 20081 Annualized 11.5-Year Top Performing Funds Annualized
( July 20081 through Dec 2014) return since (December 19992 through June 2011) 11.5-Year
July 2008 Arlington Value Management is closed return
1 All performance comparisons above are from July 24, 2008 through Dec 31, 2014 2 All performance comparisons above are from December 23, 1999 through June 30, 2011
The two tables above demonstrate how Arlington has stacked up against the S&P 500 and the top 10 performing funds of the approximately 5,000 and 3,000 US equity
funds tracked by Morningstar over the approximately 6.5 years since AVM Ranger Funds inception and the 11.5 year lifespan of Arlington Value Management LLC
respectively. The average return for all funds is likely below the returns for the index as it is widely noted that most funds underperform the index over time. Performance
for all funds is gross of management fees.
Arlington Value Management LLC was merged into AVM Ranger LP in Q3 2011. The 11.5-year data represents Arlington Value Management LLCs return from its
inception in December of 1999 through June 2011.
Data Source: Morningstar (as of Dec 31, 2013). AVM Ranger LP is a private offering and is NOT tracked by Morningstar
Batting Average:
I was a good investor myself, but I couldnt do what Warren and Charlie do so well virtually never have any losers.
Otis Booth, major Berkshire Hathaway shareholder
Arlington Value Batting Average .800+ S&P 500 Batting Average .450
Above all, we think vigilance towards risk is central to solid investment returns.
It is very easy to generate performance by taking on more risk. And so what you need to do is compensate for risk-
adjusted performance... and that is where all the bodies are buried. Ragharum G. Rajan, IMF Chief Economist
(2003 - 2007)
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V I G I L A N C E T O WA R D S R I S K
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V I G I L A N C E T O WA R D S R I S K
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V I G I L A N C E T O WA R D S R I S K
45% 45%
30% 30%
15% 15%
0% 0%
-5.11%
-15% -15%
-30% -30%
AVM AVM
-45% -45%
-44.52% S&P 500 S&P 500
-47.74%
-60% -60%
Arlingtons keen focus on risk has protected capital during the two worst peak-to-trough periods for the
S&P 500 over the last 15 years.
Period 2: (1.5 Years: Jan 2005 - June 2006): In January 2005, Arlington took on two new active partners which resulted in
material changes to Arlingtons investment process. The altered investment process resulted in significant internal conflicts. The
funds performance during this period was extremely poor.
Period 3: (8 Years: July 2006 - Current): In July 2006, Arlington went back to its original investment process and structure.
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All I want to know is where Im going to die, so Ill never go there unknown
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AV O I D T H E D E A D LY S I N S
The single greatest edge an investor can have is a long-term orientation. In a world where performance comparisons
are made not only annually and quarterly but even monthly and daily, it is more crucial than ever to take the long view.
In order to avoid a mismatch between the time horizon of the investments and that of the investors, one's clients must
share this orientation. Ours do." Seth Klarman
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AV O I D T H E D E A D LY S I N S
Madness is rare in individuals but in groups, parties, peoples and ages it is the rule. Gustave Le Bon
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AV O I D T H E D E A D LY S I N S
Overconfidence Self-Deception:
Inability to say I dont know.
Investors own too many stocks, ignoring the boundaries of their mental capacity, resulting in excessive mistakes
and harmful frictional costs.
Average holding period on NYSE: 6-months!
Never fool yourself, and remember you are the easiest person to fool. Richard Feyman
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AV O I D T H E D E A D LY S I N S
The big money is not in the buying and selling, but in the waiting. Jesse Livermore
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G E N E R A L I N F O R M AT I O N
Summary of Terms
Minimum Investment $5,000,000 Subscriptions: Monthly
Management Fee: 1.0% (Annual) Withdrawals: Monthly w/30-day notice
Performance Fee: 15% Reporting Quarterly
High Water Mark: Yes Lock-up: Soft
Hurdle Rate: No Withdrawal fee: 3%, 2%,1%, for first three years
Fixed Fee Option (2.4%) Yes Offshore Option BVI Company Ltd by Shares
Firm Management
Allan Mecham (801) 979-0655 Ben Raybould (801) 792-9590
allan@arlingtonvalue.com ben@arlingtonvalue.com
Prior Experience: Wasatch Funds Prior Experience: Leucadia National
Service Providers
Prime Broker Jefferies & Co Custodian J.P. Morgan
Contact: Evan Gevarter (212) 707-6491 One Metro Tech Center North
egarter@Jefferies.com Brooklyn NY 11201-3859
The information in this document has been furnished by the general partner of the fund and not all information has been independently reviewed or audited. Past performance is not indicative of future performance. Inherent in any investment is the
possibility of loss. This does not constitute an offer or a solicitation of an offer to buy a security. Any offer or solicitation must be made only by means of a delivery of a private placement memorandum. This document is for information purposes only and
its contents may not be reproduced or distributed in any manner without prior approval from Arlington Value Capital, LLC.
Indices are provided as market indicators only. It should not be assumed that holdings, volatility or management style of any Arlington investment vehicle will, or is intended to, resemble that of the mentioned indices. The
comparison of this performance data to a single market index or other index is imperfect because the former may contain options and other derivative securities, may include margin trading and other leverage, and may not
be as diversified as the S&P 500 Index or other indices. Index returns supplied by various sources are believed to be accurate and reliable.