Investment Philosophy

Our process is simple: we find truly great businesses that are run by talented managers with aligned incentives, and then we remain focused on valuation and reducing risk. It is completely bottom-up, one hundred percent fundamental, and implemented with a consistently long-term time horizon.

That last point – long-term time horizon – underlies everything we do. It is why we require that our companies possess sustainable competitive advantages. It is why we put so much effort into understanding the quality of a company’s management team and its incentive structure. It leads us to focus on a company’s intrinsic value, and it informs the way we view risk. 

 

We follow a four cornerstone process: 

  • High quality businesses with sustainable competitive advantages: examples are scale, low cost production, barriers to entry, industry leadership, network effects, and switching costs
  • Owner-operator management teams: they operate the business with passion and approach capital allocation from a long-term perspective focused on creating shareholder value
  • Valuation: building a margin of safety by owning companies that trade at a discount to intrinsic value. We value companies based on a discounted cash-flow analysis.
  • Risk reduction: we believe risk is the possibility of permanent capital loss. We aim to avoid this by continually monitoring the portfolio for changes in company fundamentals.