We believe in the power of downside protection. By protecting client assets in down markets, we seek to generate meaningful excess returns and lower levels of volatility over full market cycles.
Capitalizing on Two Market Inefficiencies
- TIME—most investors have a very short investment horizon. We apply our process through the lens of long-term business owners, avoiding emotional decisions and allowing our holdings to compound.
- RISK—we believe markets are less efficient at assessing risk than reward. Throughout our process, we embed downside protection, primarily by focusing on companies exhibiting its two key drivers.
Two Key Drivers of Downside Protection
- Sustainably high and improving returns on capital
- Strong balance sheet that affords management financial flexibility
Committed to Downside Protection
The foundation of our approach is to mitigate downside risk with the goal of long-term outperformance and lower volatility.
Focused on Facts to Reduce Speculation
Rather than trying to predict the future, we form our investment thesis based on what is true today, using our Balance Sheet Optimization approach to valuation.
Truly Long-Term Oriented Investors
We invest in a select number of high-quality companies through the lens of a business owner, as if we were buying the entire company to hold indefinitely.
One Team, One Process
Investing across the capitalization spectrum allows us to view companies over an extended life-cycle—from small to mid to large—and reinforces our long-term horizon.
A Long-Term Quality Value Approach
100% Bottom-Up Approach to Find Quality, Sustainable Businesses
- Durable competitive advantages, consistently high returns on capital & cash flow
- Effective capital allocation
- Capable management with incentives aligned with shareholders
- ESG through the lens of a long-term investor
Balance Sheet Optimization
A novel approach to valuation that assesses the strength & flexibility of the balance sheet to create a more concrete margin of safety
- Analyzes management’s ability to reduce its cost of capital by optimizing its balance sheet
- Limits speculation inherent in growth forecasts
- A private equity approach to public equities
Focused Portfolio Construction
Solving the Problem of Over-Diversification
- High active share: 25-35 holdings
- Better performers allowed to appreciate
- Don’t average down
- Long-term orientation results in low turnover ~20%
Help Avoid Large Losses to Maximize Return
- Misallocation of capital
- Fundamental deterioration
- Significant insider selling
- Identify more attractive candidates
- Quantitative soft stop-loss