OUR INVESTMENT PHILOSOPHY

 

Based on our experience with the day to day operations of companies, boards and stakeholders, we are convinced that psychological biases negatively affect our ability as humans to be objective.

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Highly successful investors tend to have biases suited to a particular investment environment, but the environment may change and success can lead to hubris and mistakes. We have focused our approach on building a methodological framework that is designed to reinforce what should work for investors and businesses.

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That is why we spend a lot of time trying to understand a company’s track record and their business models.

 

We focus our efforts identifying companies with a track record of creating shareholder value, with sustainable business models that can grow free cash flow over time, priced at relatively attractive valuations. To assess these qualities, we analyse a number of characteristics, for example:

 

• Organic revenue growth

• Ability to generate free cash flow

• Historic financial track record

• Track record of acquisitions

• Use of debt and leverage

• Tail risks that could lead to an impairment of capital

• Management incentivization and ownership structure

• Potential red flags in accounting, business model, or management behavior

• Understanding the business model and its downside scenarios

• Cyclical considerations

• Disruption risks

• Absolute and relative valuation metrics that appropriate reflect our analytical understanding.

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Perfect investment opportunity rarely exist and investors have to make trade-offs.  What is important to us is that these are transparently and consciously made and only when the rewards are sufficiently likely. Our process aims to identify investment opportunities with lower long-term risks, but above average returns.

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