We focus on the securities of publicly listed high-quality companies available at an attractive price (below our estimate of intrinsic value), and seek long-term capital appreciation by constructing and managing a concentrated portfolio. We believe that an attractive price determines much of the ultimate success of an investment, while representing the foundation of our most important objective: avoiding a permanent loss of capital.

Our four-step process is simple and transparent:

1. Search

The key starting decision we make is which companies, among the thousands publicly listed, deserve our time and attention. We aim at selecting good companies: high-quality businesses with strong management that drive their value higher over time.

2. Valuation

Once we’ve selected a company we’d like to own, we spend the majority of our time figuring out what it’s worth. We enjoy going through the fundamental process of deeply understanding what drives a company’s value.

3. Portfolio Construction

If a company that we’ve valued is being offered by the market at a price substantially lower than our assessment of value, i.e. with a large enough margin of safety, we advise to start building a position, its initial portfolio weight mainly depending on how attractively priced it is. A large margin of safety commands a large initial portfolio weight, and vice versa.

4. Portfolio Management

Portfolio changes over time are primarily driven by our response to changes in market prices and intrinsic values: the cheaper a company gets, the more of it we advise to own, the more expensive a company gets, the less of it we advise to own. We try and optimize position sizes by advising to execute only a few trades per month.

 

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