Rejecting the Index by Design
In an era when index investing dominates portfolios, there is a compelling case for the opposite approach: building a tightly concentrated fund of around twenty names, none of which appear in the S&P 500. This kind of "un-S&P 500" strategy is, by construction, a wager against consensus. It assumes that the most heavily traded, most widely owned American mega-caps are not necessarily where the best long-term returns will come from, and that the unfashionable corners of global markets are routinely mispriced for reasons that have little to do with the underlying quality of the businesses.
The performance evidence on this kind of approach has been encouraging. Over the past year and into the current year, a portfolio built this way has been able to outpace the S&P 500 — not by chasing momentum in well-known American leaders, but by buying durable businesses around the world that the broader market has chosen to ignore.
A Go-Anywhere, Long-Hold Philosophy
The core philosophy is simple, even if it is uncomfortable in practice: own businesses that can be held for the long term, and let geography and sector exposure follow opportunity rather than benchmark weights. This is a "go anywhere" mandate. It reaches into international markets and into industries that most index-hugging investors have very little exposure to.
The time horizon is decisive. The relevant question is not where a stock will trade tomorrow, next month, or even next year. It is where the underlying business will be in five or ten years. That horizon makes day-to-day market movements largely beside the point. Worse, paying close attention to short-term noise can actively undermine the discipline required to hold contrarian positions through periods when the market disagrees with you.
Thinking in Buckets
Rather than a sprawling list of independent ideas, the portfolio is organized into a small number of thematic buckets, each representing a coherent thesis about mispricing.
Metallurgical coal. Roughly a fifth of the portfolio is dedicated to companies that produce the coal needed to make iron and steel. The thesis here is structural rather than cyclical: essentially no new coal mines are being commissioned anywhere in the world, while global demand for iron and steel continues to rise. A market in which supply is constrained for political and regulatory reasons while demand grows steadily is a market in which existing producers should command very attractive economics over time.
Turkey. Another bucket consists of businesses domiciled in Turkey. These include airport operators, fast-food chains, and what is essentially a Turkish equivalent of Costco. Country-level pessimism — driven by macro headlines about currency, inflation, and politics — has pushed the share prices of these companies far below what their underlying franchises are worth. Strong consumer-facing businesses in a large, young, urbanizing country are exactly the kind of compounder that long-term investors should be willing to look at when the headlines are bad.
Software in the Mark Leonard mold. A third bucket is software companies that fit the playbook of disciplined serial acquirers — businesses such as Constellation Software, which buys small, mission-critical vertical software companies and lets them compound. Many of these names were sold off recently because investors fear that artificial intelligence will erode their moats. That view is most likely mistaken. These businesses continue to grow quickly, generate high returns on equity, and serve customers with deeply embedded, hard-to-replace software. The AI panic creates an opportunity to own them at prices that do not reflect their continuing economics.
Offshore drillers and other unloved cyclicals. Other holdings sit in industries that have been hated and unloved for years for what are essentially irrational reasons. Whenever a sector becomes a consensus avoid, the survivors that emerge tend to do so with consolidated industry structures, rational capital allocation, and high free cash flow — exactly the conditions in which patient capital is rewarded.
Hated and Unloved for Irrational Reasons
The common thread across these buckets is that they are all "hated and unloved for irrational reasons." That phrase is doing a lot of work. Markets often punish entire categories of businesses based on a single shared narrative — coal is dirty and dying, Turkey is a basket case, AI will eat all software, offshore drilling is in terminal decline — without distinguishing between weak operators and strong ones, or between near-term turbulence and long-run economics.
Persistent mispricing of this kind is precisely where a concentrated, patient investor can earn excess returns. The work is not glamorous. It involves studying businesses that few institutional investors want to write about and holding positions through stretches when their prices go nowhere or fall further. The reward for that discomfort is the chance to buy genuinely good businesses at prices set by people who refuse to look at them.
Market Agnosticism and the Friendliness of Volatility
A long-horizon, business-by-business approach naturally implies a kind of market agnosticism. There is no point trying to forecast the index, the VIX, the path of interest rates, or the price of oil over the next quarter. What matters is the cash flow these specific businesses will produce over the next decade.
That perspective inverts the usual emotional response to volatility. Falling markets are not a threat; they are a gift. They expand the universe of attractive opportunities and allow committed buyers to add to existing positions at better prices. A net buyer of global equities should welcome anything that disrupts the status quo, because disruption is where mispricing is born.
The Quiet Logic of Patience
Taken together, this approach amounts to a quiet but radical bet: that diversification across the largest American companies is not the same thing as exposure to the world's best businesses; that consensus narratives systematically overshoot in both directions; and that the willingness to look at metallurgical coal, Turkish airports, vertical software roll-ups, and offshore drillers will, over five to ten years, look smarter than the willingness to own whatever is most popular today.
The strategy will not be in step with the index every quarter, and that is the point. Buying what no one wants, holding it long enough for the underlying economics to matter, and treating volatility as a friend rather than an enemy is one of the few approaches in public markets that remains genuinely contrarian — and, for that reason, one of the few that retains a structural edge.