Our Investment Philosophy
Four Simple Principles Form our Philosophy
We buy shares from sellers who want out. The sellers' focus is exiting the holding and not the price received.
This happens for two reasons:
Investors are scared or bored and want to get out.
There is some type of impediment to investing. For example, we look for companies where there is dislocation such as spin-offs and index changes.
This is how we gain a competitive advantage on our purchase
Bird in Hand
We look for companies trading for less than their intrinsic value. In other words, we are looking for bargains.
In determining intrinsic value, we consider:
Private Market Value
Sum of the Parts
The difference between what a stock is worth and where it is trading is the margin of safety The bigger it is, the happier we are.
We look for staying power. In other words, in every company's life a "wolf" will come to the door. We want to be in a brick house, not a straw hut.
We look for:
Balance sheet strength
Free cashflow generation
Market share and competitive positioning
Relative cost of production
Our focus is to minimize the risk of permanent capital loss.
Alignment of Interests
Tim has served on the Board of Directors of 5 publicly traded companies. This has given us perspective and insight few fund managers have.
We look at:
Stock ownership of directors and officers
Insider buying and selling
Compensation programs (the goal posts so to speak)
Incentives and ownership matter.