We value businesses by looking at a combination of quantitative and qualitative factors including; fundamentals, peer group, capital allocation, strategy, management, culture, vision and market environment to complete our valuation assessment.
We apply an appropriate combination of valuation metrics such as Discounted Cash Flow (DCF), Enterprise Value (EV) multiples, peer group ratio/multiple comparison, historical issue specific ratio/multiple comparisons, among others.
We compare our assessment of intrinsic value to current market price and invest when the differential is sufficient to provide necessary risk adjusted return in a base case and margin of safety in the case of the unforeseen.
Assessment of management suitability and sufficiency
Is management vision well thought out, appropriately articulated, and reasonably achievable in light of the projected market environment?
Do stated corporate values match culture. Is the culture being sustained and improved.
We take a contrarian view, not by default, but rather when relevant facts and information dictate. Our goal is to identify and purchase businesses whose value is not fully reflected in the marketplace. Behavioral inefficiency and emotional response are greatest when markets are most volatile and uncertainty is most prevalent. We focus our efforts on being correctly positioned, physically, analytically and emotionally, to capitalize when market sentiment is most volatile thus providing attractive entry or addition points for our holdings.
While constraints may provide safeguards they also impede solutions and efficiency. We believe in order to achieve meaningful excess return a portfolio must be differentiated from its benchmark. Our strategies limit constraint giving us the needed flexibility to differentiate and maximize risk adjusted return for our investors.
Investing with a longer term horizon is a competitive advantage especially in light of an increasingly short term view on the part of many investors and managers. We believe that time is a great equalizer and that reactive short term thinking in the context of a long term strategy will, more often than not, cause a sub optimal outcome. Our focus is to capitalize on short term investor misjudgment and acquire long term holdings at valuations which maximize upside and limit downside.
Investment Approach | Investment Philosophy | Defining and Controlling Risk