Focus on compounders
We focus on identifying high quality companies that can become “compounding machines” and compound earnings at healthy rates over a long period of time. We look for businesses that have a large moat, operating in industries with few competitors and benefiting from a secular tailwind. We concentrate on understanding what makes a business great (quality), what can be the sustainable growth rate (growth) and how long is it going to remain that way (longevity). We believe long term wealth is created by buying great businesses at a reasonable price and staying invested for a long time.
Invest in quality management teams
We look for businesses whose management teams are driven by pride not money, are capable, ethical, and have incentives that are in sync with our own. The biggest risks in compounding wealth lie in value traps and/or management teams that are “extractors”. As a result, our assessment of the management teams is as important as our assessment of the business fundamentals.
Be patient and wait for the right price
As compounding opportunities come up only occasionally at the right price, we invest patiently but decisively. The Fund’s portfolio consists of between 15 and 20 positions and portfolio turnover is very low.
Independent thinking
While it is easy to generate a bull/bear case on any company, it is far more difficult to generate a differentiated viewpoint. We focus on identifying the key drivers of stock performance and their sensitivity to earnings and cash flow estimates of the company. We place particular emphasis on understanding how and why our views differ from consensus.
Leverage deep industry relationships
To source ideas, the investment team primarily relies on leveraging our network of industry contacts built over the last decade. This has consistently led to proprietary ideas and better research. Strong relationships with many CXOs and involvement in key industry organizations help in identifying emerging investment opportunities and changing business trends. Our investment process involves independent and exhaustive channel checks with suppliers, customers, distributors and most importantly competitors. We undertake proprietary surveys for each investment position to build first-hand knowledge on the company’s fundamentals.
Attract and retain a stable investment base
The fund has a sophisticated and stable investment base of leading US institutions, endowments and family offices. This allows us to leverage our long term investment horizon by capitalizing on temporary or cyclical down markets.
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"Time is the friend of the wonderful business, the enemy of the mediocre." - Warren Buffett
"You're neither right nor wrong because people agree with you. You're right because your facts and your reasoning are right." - Warren Buffett
"Investment is most intelligent, when it is most businesslike." - Benjamin Graham
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