Ours is a four-pronged investment process:
Identification - We first identify potential investments via industry conferences, financial reports and SEC filings, independent discovery, business networks, sell-side research, and peer networks. Given the benchmark agnostic approach, we strive to find good businesses trading at attractive valuations, but do not attempt to cover the whole market.
Stock Selection - Company-specific, fundamental analysis drives our stock selection. Companies with strong management teams, solid financial statements, leading brands, and strong business plans are identified and carefully considered. Once identified, companies with attractive risk/reward characteristics may make it into the portfolio, while attractive businesses with neutral risk/reward characteristics are cultivated on our watch list.
The buy decision is based on an attractive expected value, a sufficient margin of safety, stable or improving fundamentals and a catalyst for market recognition.
Risk Management - A concentrated portfolio provides us competitive advantage to continuously evaluate risk on each investment rather than on the portfolio as a whole. We consider risk characteristics that are company-, industry-, and market-specific to guide our risk/return calculus for each position.
Sell Discipline - Sell decisions are framed by changes in a company’s fundamentals, as well as changes in industry and market conditions or pricing that require us to reconsider our investment thesis, risk/reward calculation, and/or our expectations for the business going forward.