Our Goals
Outperform the S&P 500 Index® over time and preserve capital.
Our Philosopy, Our Differences
We believe that, to outperform the market, an investment strategy needs to be different from the market in ways that add value without adding undue risk.
Concentrated
We seek safety in quality, price, and deep understanding rather than in quantity, tending to hold between 16 and 20 stocks at a given time.
Sector-Agnostic
We are sector-agnostic, which means our portfolio may not reflect the latest market trends or index movements but it will comprise companies that we are confident will generate good returns over the long term.
Disciplined
No matter how strongly we feel about a company’s prospects, we will refrain from buying it until it is trading at a price that represents a significant discount to our (prudently conservative) estimate of its intrinsic value. Likewise, when a stock reaches our sell price, we will sell it, notwithstanding the fact that the company has typically been performing well.
Comfortable Buying What Others Are Selling
Buying stocks at a discount inherently requires buying at a time when many others are selling. We are not just comfortable with these opportunities, we embrace them knowing that, while sellers tend to be driven by fear, we remain guided by our disciplined process.
Willing to Hold Cash
We are willing to hold cash – sometimes lots of it! – while we wait patiently for the companies we love to hit a price we’re willing to pay.
Unwilling to Wander Beyond Our Sphere of Competence
Sometimes what matters most are the things we don’t do. You won’t hear us make predictions about the macro environment nor see us attempt to time our trades to the market’s gyrations. Instead, we remain focused on finding resilient companies that can weather periodic storms, and on trading those stocks when our discipline tells us the price is right.
Our Portfolio Companies: Key Attributes
Each company in our portfolio is unique, but in our view they all share certain fundamental characteristics:
Sustainable Competitive Advantage
They offer a compelling value proposition to their customers that is differentiated either in what it provides or in how it is provided. They are advantaged in ways that are durable and difficult to disrupt.
Resilience
They are able to navigate the bad times and take ample advantage of the good times.
Robust Corporate Culture & Experienced Management
They have a robust and distinct corporate culture that is appropriate to their business. They are led by strong and experienced management teams who engage in thoughtful succession planning.
Long-Term Growth Potential
They are able to grow earnings and, ultimately, intrinsic value over time.
Return on Invested Capital
They consistently generate high returns on invested capital and are supported by a healthy balance sheet.
We believe it is the combination of the individual attributes we seek that, together, will produce the returns our clients expect.
Our Research Process
Our discipline is evident in our process.
Consensus-Driven
Our research team is led by four principals of the firm who work on a consensus basis. Every member of the team researches every prospective holding, and every member of the team is responsible for knowing the ins and outs of each of our core holdings. What’s more, no company may be added to our portfolio unless all four principals unanimously agree to add it.
Consistent, Yet Flexible
Any company that reaches the “vote” stage of our process has been subject to the same rigorous analysis. For each such company, our research team has read publicly available materials, spoken to representatives of the company and its competitors, conducted a discounted free cash flow valuation, and completed our “checklists” — simple, yet critical tools that we designed to ensure that we’ve left no stone unturned.
Conservative
Every aspect of our process is designed to advance our goal of capital preservation. All research team members get to know each company equally well so that we avoid the temptation to become a cheerleader for a company on which any one of us might otherwise be “the expert.” We use our valuation to determine a conservative estimate of a company’s intrinsic value, from which we take a significant discount to establish a buy price. We complete our checklists to surface qualms and biases. It is not easy for a company to enter our portfolio. We require unanimity in the final vote because we believe that a good faith, informed “no” vote deserves the privilege of our collective deference.
In short, because our goal of protecting our clients’ capital is paramount, we would rather make a mistake of omission than a mistake of commission, and our process is designed with this at the forefront.