“In my opinion, investment success will not be produced by arcane formulae, computer programs or signals flashed by the price behavior of stocks and markets. Rather an investor will succeed by coupling good business judgment with an ability to insulate his thoughts and behavior from the super-contagious emotions that swirl about the marketplace.”
— Warren Buffett, Letter to Berkshire Hathaway shareholders. (February 29, 1988 for FY1987)
Our investment philosophy is based on two principles: Quality + Value
Quality: We favor companies with definable strengths, sustainable profitability, and the ability to grow their cash flow. These attributes carry on after cycles turn and catalysts pass.
Catalysts that Unlock Value: We look for stocks trading below their fair value, which lowers the odds of us over paying for higher-quality companies. Additionally, we place a high priority on defining catalysts that will unlock this value. This discipline increases the odds of actually realizing the value we find.
Our Approach to Investing
We are contrarian in that we look for stocks or parts of the market that are currently out of favor or where perceptions are wrong. Many times, these are the places where our best opportunities are found.
Since there are no guarantees in investments, we demand a meaningful margin of safety when we consider a new stock for the portfolios.
Investment research takes discipline, time and hard work. We read filings, talk with company management, and monitor companies’ competitors. If it was easy, everyone could do it or the opportunity would not exist.
If we cannot reasonably assess the company’s value, or if the upside potential is simply not there, it does not qualify as a good investment idea despite how interesting the company might be.