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Our Investment Philosophy

We call our investment philosophy Focused Business Investing and it can be boiled down to one simple concept: we buy great businesses when they offer us enough return for the risk we are exposed to.

There are a number of things that go into making a business great, but the most fundamental factors are:
Recurring Free Cash Flow
  • Any business that does not generate recurring, positive free cash flow is just a collection of liquidating assets
  • Positive free cash flow is what gives a business intrinsic value
Irreplaceable Assets
  • Irreplaceable assets are the economic moat that allows a business to resist competition and generate higher returns on capital
  • They can be tangible or intangible and their existence is proof of the Franchise quality of the business
Low Debt
  • All else being equal, less debt in a business’s capital structure reduces the volatility of the business’ cash flows and margins over the course of a cycle
  • Less debt also means more cash flow is available to finance dividends and share buybacks to boost returns to equity investors
Strong Management Team
  • Management should behave like owners and treat you like partners
  • Disclosure and long term returns on capital are great indicators of the quality of the management team
Many other smart investors are also looking for these attributes, so patience and conviction are required. Patience to wait for these companies to offer sufficient returns for the risk incurred. Conviction to buy large positions when the returns do materialize. The result is concentrated portfolios of great businesses that we expect to generate superior, risk-adjusted returns over the long term.
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