Our Returns

Quietly, independently, outperforming.

At Turtle Creek, we are focused on our investments first. Since Turtle Creek’s strategy inception on November 1, 1998, an investment of $1,000 has grown to $62,392 by October 31, 2020, which equals a compound annual increase of 21%.1 This is in stark contrast to the Market2 which has increased from $1,000 to $3,822, which equals a compound annual increase of 6%.

Growth of $1

Risk and return can be inversely correlated.

We believe risk is the prospect of permanently losing money. This contrasts with most investors and academics, who describe risk as the likelihood and magnitude of prices bouncing around. We manage risk by understanding the value of the companies we invest in and then constructing a diversified portfolio that, among other things, owns relatively more of what we believe are the most attractively priced companies. Put simply, the cheaper something is, the less risky it is.

Risk must also be evaluated according to an investor’s time horizon. Someone who needs access to all of their money at a moment’s notice has zero capacity for risk. Most true investors have longer horizons and should therefore measure risk (the chance of losing money) as a decline in value over a reasonable period of time. We believe three years is the minimum period for assessing the investment risk of an equity portfolio. Three years is the point at which the value of a portfolio starts to cross over from the “voting” characteristics of the market to the more reasoned “weighing” that develops.

Having started Turtle Creek more than 20 years ago, our performance comprises a large number of rolling three-year return periods that, taken together, we think appropriately illustrate the risk/return characteristics of our strategy.3

The following graph counts the number of three-year annualized rates of return that fall within intervals of 10%, depicted as green horizontal bars and totaled at the top, for Turtle Creek.4 For easy comparison purposes, we present Market5 returns for the same periods in black. Liquidity for our funds is available at month-end, accordingly the first three-year investment period is 31-Oct-98 to 31-Oct-01. The next three-year period is 30-Nov-98 to 30-Nov-01, and so on.

Distribution of Annualized Three, Five and Ten-Year Returns (from founding in 1998 to present)

3 Year

Turtle CreekMarket
X = Three-Year Annualized Return Intervals
Y = Number of Three-Year Investment Periods

There are more than 200 discrete three-year investment periods in the history of Turtle Creek which the graph makes easy to assess both in absolute and relative terms. For example, we have produced negative three-year returns only 7% of the time, compared to the Market at 19%. We have also produced a large number of >20% annualized rates of return. In comparing specific three-year periods, Turtle Creek has outperformed the Market 81% of the time (often by a large amount). And if you extend this exercise to look at all rolling five- and ten-year investment periods, the divergence in performance only becomes greater. In comparing specific ten-year periods, Turtle Creek has always outperformed the Market.    

Comparison of Annualized Three-Year Returns

 Turtle CreekMarket
Number of outperforming periods:187 of 229  (82%)42 of 229 (18%)
Number of negative periods:15 of 22945 of 229

5 Year

Turtle CreekMarket
X = Five-Year Annualized Return Intervals
Y = Number of Five-Year Investment Periods

There are more than 200 discrete three-year investment periods in the history of Turtle Creek which the graph makes easy to assess both in absolute and relative terms. For example, we have produced negative three-year returns only 7% of the time, compared to the Market at 19%. We have also produced a large number of >20% annualized rates of return. In comparing specific three-year periods, Turtle Creek has outperformed the Market 81% of the time (often by a large amount). And if you extend this exercise to look at all rolling five- and ten-year investment periods, the divergence in performance only becomes greater. In comparing specific ten-year periods, Turtle Creek has always outperformed the Market.    

Comparison of Annualized Five-Year Returns

 Turtle CreekMarket
Number of outperforming periods:183 of 205  (89%)22 of 205 (11%)
Number of negative periods:8 of 2055 of 205

10 Year

Turtle CreekMarket
X = Ten-Year Annualized Return Intervals
Y = Number of Ten-Year Investment Periods

There are more than 200 discrete three-year investment periods in the history of Turtle Creek which the graph makes easy to assess both in absolute and relative terms. For example, we have produced negative three-year returns only 7% of the time, compared to the Market at 20%. We have also produced a large number of >20% annualized rates of return. In comparing specific three-year periods, Turtle Creek has outperformed the Market 82% of the time (often by a large amount). And if you extend this exercise to look at all rolling five- and ten-year investment periods, the divergence in performance only becomes greater. In comparing specific ten-year periods, Turtle Creek has always outperformed the Market.    

Comparison of Annualized Ten-Year Returns

 Turtle CreekMarket
Number of outperforming periods:145 of 1450 of 143

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