The goal of our strategy is to grow your capital by accumulating, over time, a diversified portfolio of enduring companies that provide a combination of sustainable growth and income for many years to come.
How will we accomplish this goal?
We have a two-pronged approach to delivering value-add which we believe is the right way to invest for the long-term:
1. Getting the big picture right
We have spent many years studying and modeling the market at the macro level to gain an understanding of the key factors that influence equity returns over the medium and long-term. These factors have been reliable over multiple economic cycles over the past 50 years and are logical and intuitive. With this in mind, and given that the majority of your equity returns are a function of the direction of the overall market, there are certain times when it makes sense to have more or less exposure to the market. This macro framework guides our overall market exposure level at any point in time, which can vary from leveraged long to short.
2. Individual stock selection.
Our approach here is based on preparation, patience, and a focused approach to the types of companies we select – we seek enduring value opportunities in the less treaded small to mid-cap space.
The preparation part entails an ongoing and active research effort to maintain an inventory of well-researched ideas of companies that we wish to own for the long-term and also some that we would never wish to own. Our current inventory of ideas totals approximately 40 long ideas and 10 short ideas. As time passes and the size of our list grows, we will naturally be exposed to more frequent opportunities to add value for you. While the majority of candidates on our list will not currently be trading at a price that will entice us to buy or sell, with this preparation, we are in a position to take advantage when the market, from time to time, delivers these opportunities. This is the patience aspect and is very much consistent with Warren Buffet's philosophy best explained by one of his famous quotes:
"The stock market is a no-called-strike game. You don't have to swing at everything - you can wait for your pitch. […] the most important thing - for a hitter - is to wait for the right pitch. [...] And that's exactly the philosophy I have about investing - wait for the right pitch, and wait for the right deal. And it will come...It's the key to investing."
The types of companies we invest in
Further, our specific focus is on smaller to mid-cap companies that exhibit more pricing inefficiencies than large-cap companies and where solid research can uncover good opportunities - these are not blue-chip stocks, but nevertheless good-quality companies. With a value-based focus, we try to buy companies with a healthy margin of safety and at attractive valuations, and since our holding period is long-term, are not phased by fluctuations in the stock price which are not driven by a change in fundamentals.
Lastly, we want companies that are enduring, i.e. will still be around in 15 years’ time. The evidence is clear that company lifespans are declining and the trend is accelerating. Our focus is thus on companies where we can visualize with some clarity that their products will still be in demand in 15 years’ time, for example, things like residential real estate, food staples and related packaging, agricultural products, or waste management to name a few.
Our value proposition in sum
We believe that the combination of our proprietary macro framework together with our individual equity research skillset, a growing list of investment candidates, and a disciplined and patient approach to allocating your capital will deliver superior and enduring value over the full cycle.
If you find the strategy to be interesting, then we recommend your next step is to review our Long-Short Equity Solution for more specifics. After that, please reach out if you would like to get started or have questions.