Our equity strategy

We are pleased to provide a better understanding of our beliefs and approach to investing your capital in the equities markets (stock market). Our goal is to compound capital at an above-average rate, while incurring a below-average level of risk of losing permanent capital. Our approach is based on these core beliefs:

• We believe the worst investment enemy is the investor themselves, being fearful or emotional at the wrong time. Investor behavior creates bargains and mispriced assets; we bring considerable discipline to buy when some are fearful and sell when others are overenthusiastic.
• We believe many investors are too active, having heard that “no one ever went broke taking a profit.” We also don’t believe you will get rich with this philosophy.
• We believe most investors overdiversify. How much do you know about your 50th holding?
• We believe the terms “growth” and “value” are not mutually exclusive investing styles. The most important component in determining the value of a company or security is the future growth opportunity.
• We do not get involved with the hot fads of the day.

Quality businesses that do the work for you

• Competitively advantaged businesses
• Compounding companies
• Reinvestment opportunities
• Experienced management

Seek out superior businesses with defensive moats: Durable, predictable, high return on invested capital and free cash flow Identifiable, sustainable competitive advantages Easy to understand Have strong sustainable pricing power Strong balance sheets  How likely will the moat be intact in 10 years? Is the product or service a good deal from the customer’s point of view?

Extensive opportunities to reinvest free cash flow organically or through acquisitions: Pattern of discipline reinvestment that generates  compelling compounded growth

Highly skilled managers who treat their shareholders as partners: Pursue highest return on incremental dollar invested Exceptional skill, integrity and passion Indifferent to Wall Street’s short-term focus Lean corporate culture fosters independence accountability Capital allocation: Does management thoughtfully weigh dividends, buybacks, mergers and acquisitions, and debt repayment?

 

Learn more 

While our investor approach does not change, we always try to apply these principles more effectively. This requires a continuous application of humility, feedback and accountability. To learn more about our equity strategy in full, view here or contact us today.