Investment Philosophy
Investment Philosophy
What is our Goal
Key Investment Principles
Financial Strength
The first thing we consider is the balance sheet. A businesses ability to endure and survive is based on the strength of its balance sheet, and the nature of the assets on the balance sheet. Only companies with solid balance sheets and appropriate debt levels for the business model, are considered for investment.
Business Quality
Our research process is centered on the quality of the business. We look for businesses with sustained competitive advantages that can earn attractive returns on capital in the future. We are attracted to businesses with durable and enduring characteristics and avoid investments that are highly speculative or overvalued.
Quality of Management
We seek to invest in businesses with capable managers whose interests align with shareholders. We have a strong preference for founder-led businesses. This is because a business owner has a long-term perspective and is far more interested in its survival. This long-term time preference, results in a stronger and more resiliant business. We trust individuals who have demonstrated a track record of being responsible, accountable and hounourable in their actions. These character traits and long term focus are rewarding for shareholders.
Valuation
Our focus is on buying good businesses at good prices. Valuations act as a bridge between a company's financials and its stock price. Understanding the relationship between the two is essential for evaluating potential returns. We will look to invest where our assessment of the quality and underlying value of a business exceeds its current market price. We will not sacrifice our investment standards to manufacture opportunities.
Patience and Discipline
Patience is a critical component of successful investing. We live in a world where everyone wants instant gratification, but investing requires a long-term perspective. Short-term market fluctuations are inevitable, but by staying disciplined and focused on our long-term investment objectives, we can generate superior returns over time. By following these principles, we can build a resilient and diversified investment portfolio that generates superior long-term returns while managing risk and preserving capital.
What drives the Stock Market Longer Term?
- Markets follow the direction of earnings
- Earnings are driven by economic activity
- Economic activity is generated by liquidity
- Liquidity availability is driven by Central Bank policy
- Central Bank policy is driven by inflation and unemployment