"The investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage." - Benjamin Graham
Our clients portfolios are managed with a disciplined, bottom-up approach. This is considered the most consistent and prudent time tested investment philosophy. We want:
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Understandable and predictable business - We focus on established companies with a history of creating shareholder value. Understanding the economics of the business means that we are able to identify the profitability drivers, competitive threats and strengths/weaknesses of the business model.
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Management - We are looking for honest, intelligent and enthusiastic managers with a demonstrable track record for creating shareholder value.
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Competitive Advantage - Companies having an durable "economic moat" against competition are more valuable. They usually hold a monopoly, near monopoly or oligopoly positions within their industry and have above average margins. Definable and measurable competitive advantages are evidenced by size, the network effect or switching costs, also by intangibles such as goodwill and brand awareness.
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Capital Efficient - We prefer companies that generate strong free cash flow and high returns on capital. These businesses should be able to finance growth internally or return excess capital to shareholders through dividends or share repurchases.
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Valuation - Holdings are continuously monitored and evaluated against our estimates of intrinsic value based on discounted cash-flows and relative earning multiples.
