Investment Discipline – Investment Process
Stocks represent fractional ownership in real businesses. We do not regard them as mere pieces of paper or speculative wagers. Our investment process emphasizes fundamental research using both quantitative and qualitative techniques.
Track Company Earnings and Stock Prices
Our investment management team tracks earnings information and stock prices on companies around the world.
Identify Long-Term Trends
While we research companies on a case-by-case basis, we also attempt to define broader, long-term trends that influence the potential for certain companies to create value over the long term. Thus our method, while predominantly bottom-up, incorporates a top-down element as well.
Our investment management team conducts extensive research into company fundamentals, reviewing financial statements and regulatory documents.
Interview Company Management
We insist on interviewing the executive management teams, employees, clients, and competitors of prospective companies.
We apply a proprietary method for calculating the intrinsic value of a business based on a company’s Owner Earnings. Owner Earnings are determined by adjusting reported net income to more accurately reflect the true cash profits of a business. We build positions strategically when shares of companies can be purchased at discounts to their intrinsic value.
We consider selling an investment on the basis of deteriorating fundamentals, a negative change in management or strategy, or excessive valuations.