We do a lot of research. Our active value investment research process involves a lot of research. So we invest only if we have confidence that you won’t lose money – even if the worst happens. That’s why our clients’ portfolios were among the best-performing ones of the 2008 crisis.
Next time the market crashes,
don’t be caught with your pants down
How our investment process works
Find a good
business
Imagine the
worst: Still a
good investment?
Buy it
Monitor the
Business
Sell it when
the time is right
- We find potential investment candidates through screens, other investors, or our watch list.
- We ask, “Is this a high-quality business? Would we be comfortable owning it for 5-10 years if the stock market was closed?”
- We research the business and talk to its management, suppliers, customers, as well as our own network of investment professionals
What “High-Quality” Means to Us
- Transparent, simple to understand
- Significant competitive advantage
- High recurrence of revenues
- Balance sheet a source of strength
- Management owns a lot of stock
- Well-managed
- Intelligent allocation of capital
- With our research team, our proprietary methodology, and advice from specialists in the particular industry, we build a thorough model of the businesses that pass the first step of our process.
- We analyze hundreds of businesses every year – but invest in only a handful of new ones. Read more
- Using our models, we value the business: How much will it be worth 3-5 years from now?
- We try to “kill” the business by applying worst-case scenarios and discard it if we find it too vulnerable.
- We arrive at the worst-case scenario valuation of the business through our analysis and stress-testing. By comparing the worst-case scenario valuation and the stock’s market price, we arrive at the decision to either buy the stock, keep it on our watchlist, or reject it.
If we bought a stock, it means:
- Our in-depth research showed it to be a high-quality business
- We couldn’t “kill” the business (i.e., we think it’ll survive the worst case scenario)
- It’s at a good price after given our valuation and accounting for potential risks and a large safety margin
We put businesses we couldn’t kill but that are too highly priced on a waiting list until they reach our target price.
Purchasing a stock is just the beginning for us. We continue to further reduce your risk of investing in the new purchase through the next two steps of the investment process.
We treat purchased stocks as if we were looking at them for the first time.
We continue to research the company, build and update our models, and try to “kill” the business. If new information causes us to revalue the stock, we make sure it’s still a good investment for your portfolio.
And we sell the stock with no hesitation if new research shows that it’s no longer a great investment.
We then sell for one of 3 reasons:
- A stock reached its full potential.
Since stock valuation is more art than science, we avoid emotional decisions by selling half once it reaches the bottom of our target range, and the other half when it crosses the top of the range. - We found a better stock (that offers higher risk-adjusted returns).
- Something went wrong.
We continuously re-evaluate our portfolio. If we discover that the assumptions in our valuation of the business were off (or something unexpected happened) such that it’s no longer a good purchase, we get rid of it without hesitation.
How our investment process works
Find a good business
- We find potential investment candidates through screens, other investors, or our watch list.
- We ask, “Is this a high-quality business? Would we be comfortable owning it for 5-10 years if the stock market was closed?”
- We research the business and talk to its management, suppliers, customers, as well as our own network of investment professionals
What “High-Quality” Means to Us
-
-
- Transparent, simple to understand
- Significant competitive advantage
- High recurrence of revenues
- Balance sheet a source of strength
- Management owns a lot of stock
- Well-managed
- Intelligent allocation of capital
-
Imagine the worst:
Still a good investment?
- With our research team, our proprietary methodology, and advice from specialists in the particular industry, we build a thorough model of the businesses that pass the first step of our process.
We analyze hundreds of businesses every year – but invest in only a handful of new ones.
READ MORE- Using our models, we value the business: How much will it be worth 3-5 years from now?
- We try to “kill” the business by applying worst-case scenarios and discard it if we find it too vulnerable.
- We arrive at the worst-case scenario valuation of the business through our analysis and stress-testing.
- By comparing the worst-case scenario valuation and the stock’s market price, we arrive at the decision to either buy the stock, keep it on our watchlist, or reject it.
Buy It
If we bought a stock, it means:
- Our in-depth research showed it to be a high-quality business
- We couldn’t “kill” the business (i.e., we think it’ll survive the worst case scenario)
- It’s at a good price after given our valuation and accounting for potential risks and a large safety margin
We put businesses we couldn’t kill but that are too highly priced on a waiting list until they reach our target price.
Purchasing a stock is just the beginning for us. We continue to further reduce your risk of investing in the new purchase through the next two steps of the investment process.
Monitor the Business
We treat purchased stocks as if we were looking at them for the first time.
We continue to research the company, build and update our models, and try to “kill” the business. If new information causes us to revalue the stock, we make sure it’s still a good option for your portfolio.
And we sell the stock with no hesitation if new research shows that it’s no longer a great investment.
Sell it when
the time is right
We then sell for one of 3 reasons:
- A stock reached its full potential.
Since stock valuation is more art than science, we avoid emotional decisions by selling half once it reaches the bottom of our target range, and the other half when it crosses the top of the range. - We found a better stock (that offers higher risk-adjusted returns).
- Something went wrong.
We continuously re-evaluate our portfolio. If we discover that the assumptions in our valuation of the business were off (or something unexpected happened) such that it’s no longer a good purchase, we get rid of it without hesitation.