Our approach is fundamentally simple: we invest with a significant margin of safety in company’s that have a strong competitive advantage defined as higher barrier businesses with strong customer captivity. Often, their Intrinsic Value is misunderstood due to short term events that were misinterpreted by the markets. We look for the following criteria:
- A business having some control over its own destiny by virtue of a niche, or franchise that insulates it from competition, and allows it to price its products or services adequately.
- A business that generates more cash than it needs to conduct its operations.
- A business we can understand.
- A business that has honest, intelligent management who treats shareholders as partners in the business, rather than necessary evils.
- A business that wisely invests its capital and reaps superior returns on its investment.
- A business with a lean expense structure that can keep expenses low and is better able to compete in difficult periods.
- A business that has a strong balance sheet to enable a company to weather difficult economic cycles.
- A business that has a proven ability to expand internationally and reduces the risk of being tied to the U.S. business cycle.
- A business that uses technology to reduce costs, increase efficiency, and improve sales.