Our Investment Philosophy
Looking for 40 cent dollars
Four Simple Principles Form our Philosophy
Accident
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:
-
Replacement value
-
Liquidation value
-
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.
Brick House
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.