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In evaluating potential investments we focus on company's competitive position, leadership, its ability to generate large amounts of cash over the long haul and the intelligent investment of the excess cash beyond its operating requirements.
We are buy-and-hold investors; we will not let short-term volatility dictate our decision making. Obviously we will sell shares if we believe it will benefit our long term returns.
We believe the financial markets are chaotic. The prices of stocks and bonds depend on the human beings who buy and sell them, and those traders often act out of highly emotional reactions rather than coolly logical calculations. Opportunities can be found by carefully studying the value and the market prices of assets.
Investment Principles
- Think Independently - We try to be skeptical of conventional wisdom and try to avoid the waves of irrational behavior and emotion that periodically engulf the equity markets world wide. We do not ignore unpopular companies; on the contrary, such situations often present the greatest opportunities.
- Invest in high-return businesses - We invest in high-return businesses that are run for the shareholders. Over the long run, appreciation in share price is most directly related to the return the company earns on its shareholders' investment.
- Pay a reasonable price - Pay only a reasonable price, even for an excellent business. We always look for a margin of safety - that is the discount to intrinsic value. Even the world's greatest business is not a good investment if the price is too high. Buying the right stock at the wrong price will produce unsatisfactory or even negative returns.
- Invest for the long term - Attempting to guess short-term swings in individual stocks, the stock market, or the economy, is not likely to produce consistently good results.
- Do not diversify excessively - We concentrate our investment capital in a few truly sensational ideas. The more diversification, the more performance is likely to be average, at best.
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