Investment Philosophy

Throughout our history, we have followed the same investment principles:

Invest in high quality companies. We search for superior businesses that have unique, enduring franchises with sustainable competitive advantages. They must also have proven business models with a history of profitability, earnings growth, high returns on equity and capital, and excess cash generation. These businesses must have attractive growth opportunities – we look for companies that are capable of growing their intrinsic value for a number of years. Finally, we want our companies to have disciplined management teams that allocate capital wisely.

Wait for an attractive valuation. Once we find a business we like, we estimate the company's intrinsic value based on a discounted free cash flow analysis. We then wait for the market to provide us an opportunity to buy shares below this intrinsic value. We are willing to be patient. As a result, we may lag the market during bull market bubbles, but we believe that not overpaying will result in superior results over the long term and better downside protection for our investors.

Use concentrated portfolios. Given our stringent requirements, only a limited number of companies meet our investment criteria. Therefore, when we do find an attractive opportunity, we try to invest as much as we can without taking excessive company-specific risk. As a result, the typical portfolio has between 15-20 positions with each position representing 3-10% of the portfolio. We will increase and trim positions based on our view of the position's expected return to take advantage of short term market volatility.

Invest for the long term. We are long term investors. Given our selective investment criteria, once we find a company we like, we tend to hold it for a long time. We believe that the best way to build wealth is to find great businesses and hold them while they grow and prosper. Our long term investment horizon results in low portfolio turnover and low trading and tax expenses. Notwithstanding our long term investment horizon, we will sell a position if we foresee a deterioration in the company's fundamentals and / or its valuation is far above our view of its intrinsic value.