Our Goals
Outperform the S&P 500 Index® over time and preserve capital.
The Value of Being Different
To outperform the market, an investment strategy needs to be different from the market in ways that add value on a risk-adjusted basis.
We stand apart from the crowd and avoid “consensus” stocks. We employ independent thinking and find opportunities where others don’t see them.
Over our 30+ year history, the reward for our clients has been capital preservation and long-term outperformance with lower volatility.
Investment Discipline
Our philosophy of differentiation is reflected in the core tenets of our investment discipline.
Concentration
Rather than seek safety in quantity, we seek safety in quality and price.
Willingness to Hold Cash
We hold cash — sometimes a lot of it — as dry powder when the companies we want to own are not available at attractive prices.
Patience & a Tolerance for Discomfort
Whereas others bend with the whims of the market, we remain patient and adhere to our discipline whatever the circumstances. In fact, we believe that it is precisely during periods of discomfort that an investment discipline matters most.
The Companies We Seek: Key Attributes
Resilience
To be considered for our portfolio a company must be able to navigate the bad times nimbly and take opportunistic advantage of the good ones.
Long-Term Growth Potential
Marshfield seeks companies that provide something that customers value and will likely continue to value over the long term, giving them the ability to grow earnings and, ultimately, intrinsic value over time.
Experienced Management & Robust Corporate Culture
We look for companies with a robust and distinct corporate culture that is appropriate to the business. Additionally, we require strong and experienced management teams.
Process
We are fundamental, bottom-up investors.
We employ our time-tested process to identify companies with long-term competitive advantages in high return businesses that are trading for temporarily cheap prices. We eschew the style-box approach embraced by many, and are sector and cap agnostic. Our process is one of collective engagement intended to surface qualms and anomalies relevant to the companies we examine. Our six-person research team is led by four principals of the firm who work on a consensus basis.
Qualitative Analysis
We seek companies with high returns on invested capital that demonstrate care in using that capital. A high caliber balance sheet and high quality earnings are essential. Free cash flow is also critical, as is the predictability of those cash flows over a number of years. The ultimate objective of our quantitative analysis is to establish a conservative estimate of a company’s intrinsic value, which we use as a point of reference in determining both our substantially discounted buy price and our materially “overvalued” sell price.
Quantitative Analysis
We seek companies with high returns on invested capital that demonstrate care in using that capital. A high caliber balance sheet and high quality earnings are essential. Free cash flow is also critical, as is the predictability of those cash flows over a number of years. The ultimate objective of our quantitative analysis is to establish a conservative estimate of a company’s intrinsic value, which we use as a point of reference in determining both our substantially discounted buy price and our materially “overvalued” sell price.
Assessment
If a company of significant interest emerges from our initial financial and qualitative screens, we use “checklists” — simple, yet critical tools — to determine whether we wish to add it to our buy list and to ensure that we’ve left no stone unturned. We are highly selective, adding to our list only the very best ideas.
Price
We require a “margin of safety” — a discount off of our internally generated estimate of intrinsic value — when either adding a name to a portfolio or supplementing an existing position. Similarly, our price discipline dictates that we trim or liquidate a holding when it is trading at the high end of our estimate of possible intrinsic values.
7
Analysts on the research team, four of whom are principals
80-100
Number of companies we talk to per year
16-20
Desired number of stocks in our portfiolios