Our focus is primarily on companies operating in North America. For various properties such as capital flows, economic strength and innovation, this geography provides the most fertile ground. Sustainable growth, leading market position and reasonable valuation are the main selective criteria.
The inception of investment research is dissecting the financial statements. Initially, we perform a historical analysis of how capital was earned and spent through various cycles. The other part is analyzing various ratios such as margins, leverage and return on investment. This helps us understand whether the company is creating and capturing value. We repeat these exercises for companies in a similar sector. Financial indicators and capital flows are the reflection of competitive forces at play.
Numbers can only describe part of the story; we complement our analysis with qualitative research. Our investment universe focuses on companies exhibiting a growing competitive advantage. Advantages aren’t permanent as change can affect customers, suppliers and competitors. This is where we dig deeper into the company leadership and the direction of capital. Our preference is for companies with a management team in place that is capable and more importantly properly incentivized to follow the right strategy.
Lastly, we filter and invest in companies that trade at a reasonable valuation. The less you pay for any investment, the higher the rate of return. This is the cornerstone of our investment philosophy.
For excerpts of our work, visit the Publications tab.
