Nick Sleep is a British investor who co-founded the Nomad Investment Partnership with Qais Zakaria in 2001. Over roughly 12 years, Nomad turned $1 into about $10.20 while the MSCI World Index barely doubled, making Sleep one of the most admired stock pickers of his generation.
The Nomad Years
Sleep did not follow the usual path into finance. After stints that reportedly included landscape architecture and IT work, he landed as an analyst at Marathon Asset Management in London in 1995. In 2001 he persuaded his employer to back a new fund he would run with Qais Zakaria, a fellow analyst. The Nomad Investment Partnership ran from September 2001 to December 2013.
The numbers are the stuff of legend. Nomad compounded at roughly 20.8 percent a year net of fees, for a cumulative return of about 921 percent. The MSCI World Index returned about 117 percent over the same stretch. Sleep and Zakaria did this with a portfolio that was often just a handful of stocks, held for years at a time.
In 2014 they returned outside capital and wound the fund down. The last portfolio reportedly held essentially three stocks: Amazon, Costco, and Berkshire Hathaway. Sleep and Zakaria simply kept holding them with their own money.
Scale Economies Shared
Sleep’s central investment idea has a simple name: scale economies shared. Most companies that get bigger keep the savings for themselves, widening their margins. Sleep hunted for the rare companies that pass their scale benefits back to customers in the form of lower prices, better selection, and faster delivery.
His canonical example was Costco. In a famous 2004 letter, Sleep laid out how Costco caps its markups at a fixed maximum, runs its stores on razor-thin operating costs, and pours the savings back into prices. Customers notice, they keep coming back and renewing memberships, volumes grow, suppliers offer better terms, and the cycle repeats. Most retailers auction shelf space to the highest bidder and pocket the rents; Costco, Sleep argued, shared the spoils with the shopper.
He saw the same machinery at Amazon. Quoting Jeff Bezos’s 2005 shareholder letter, Sleep highlighted Bezos’s deliberate choice to keep lowering prices as scale made it possible, a decision Bezos himself admitted “goes against the math” in the short term. Sleep’s judgment was that this customer-first reinvestment created a virtuous cycle: lower prices bring more customers, which brings more scale, which funds even lower prices. The payoff shows up in free cash flow years later, long after impatient traders have moved on.
This is why Sleep is so often compared to Warren Buffett. Both men buy wonderful businesses run by owner-oriented managers, concentrate heavily, and then do almost nothing. But Sleep’s framing is distinct: he was not buying cheap stocks in the classic value sense. He was buying compounding machines at reasonable prices and letting time do the work.
The Nomad Letters
Part of Sleep’s fame comes from his writing. The Nomad Letters, the partnership’s annual and interim letters to investors, are freely available online and have become cult reading for investors. They run to well over 100,000 words of unusually clear thinking about business, compounding, and human behavior.
The letters are where Sleep worked out ideas like destination analysis, thinking about where a business is headed in five or ten years rather than where it stands this quarter. They are also where he described Nomad’s deliberate contrarianism: the partners ignored Wall Street research, kept their distance from market noise, and designed everything around competing at the long end of the investing time horizon while everyone else fought over the next earnings report.
What He Got Right
Sleep bought Costco in 2002 and Amazon in the mid-2000s, adding heavily during the 2008 financial crisis when most investors were selling everything. At one point the fund held more than a fifth of its assets in Amazon alone. That is the kind of position sizing most professional managers consider career suicide.
It was not a smooth ride. Nomad fell roughly 45 percent in 2008, worse than the market. Sleep and Zakaria held their nerve, and the fund recovered strongly in the years that followed. The episode is a case study in what concentration demands: the willingness to look wrong, sometimes for a long time, while the underlying businesses keep compounding.
He also understood incentives. Nomad charged a low fixed fee to cover costs plus a performance fee only on returns above a hurdle, a structure designed so the managers got paid only for results their investors could not have gotten from an index fund. Sleep has always treated fund management as a partnership, not a fee machine.
Criticisms and Limits
No investing record survives scrutiny without caveats, and Sleep’s is no exception. The first is concentration itself. A portfolio of three to ten stocks can deliver extraordinary returns, and it can also deliver extraordinary drawdowns. Most investors who try to copy this approach will not have Sleep’s judgment about which businesses are true compounders, and they will not have his temperament when the portfolio is down 45 percent.
The second is era dependence. Nomad’s golden years coincided with a long bull market for exactly the kind of quality growth companies Sleep favored, with falling interest rates pushing valuations ever higher. Buying great compounders and holding them looks genius when multiples expand; it is a harder game when they contract.
The third is that the strategy was never really available to copy. Nomad was a small, nimble partnership whose managers could take decade-long positions without explaining themselves to anyone. A mutual fund with daily redemptions, or an individual investor who panics in a crash, cannot run the same playbook.
Still, Sleep’s core insight survives every criticism: in the long run, the investor’s return converges on the return of the businesses owned. Find companies that share their advantages with customers, pay a fair price, and then get out of the way. It sounds simple because it is simple. It is just not easy.
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