Owner-related business principles
These are the commitments we make to every shareholder who entrusts us with their long-term capital — set out plainly, so you know exactly how we think.
Your capital matters to your future. Rule one: don't lose it. Rule two: don't forget rule one. Rule three: make as much as possible while remembering rules one and two.
We invest in quality companies at a substantial discount to intrinsic value, with a margin large enough to absorb unfavourable developments or errors in our own valuation.
Our long-term goal is to grow per-share intrinsic value. Intrinsic value is subjective, so we use net asset value — portfolio value plus cash, less deferred tax and other liabilities — as an auditable proxy.
We are long-term investors who welcome market dislocation. We would rather earn a bumpy 15% than a stable 10% — expecting markets to move in a straight line is fantasy.
Our performance is measured against the JSE Top 40 and major global indices, not simply whether a given year was positive. Losing 15% while the Top 40 fell 25% is a better year than both of us gaining 20%.
We're averse to relying on the kindness of others. Where debt makes clear business sense — liquid, cash-generative, well-margined opportunities — our exposure will never push the debt-to-equity ratio above 10%.
We have no idea what the economy will do next year, and won't pretend otherwise. Our effort goes into finding undervalued securities, not predicting macro moves.
We see ourselves as managing partners and the company as a conduit through which shareholders own the underlying assets — not as the ultimate owner itself.
No fixed percentage fee on assets. We're rewarded through performance above an 8% hurdle rate, paid as shares retained in the company — the same economic fate as our shareholders.
We tell you the business facts we'd want to know if our positions were reversed — pluses and minuses both — through annual and quarterly shareholder reports.
We discuss our activity in marketable securities only after a position is taken and secure. Good investment ideas are rare and valuable, so we don't narrate our strategy in real time.
We prefer to retain earnings and reinvest rather than pay dividends, testing that choice by whether five-year retention outperforms the JSE Top 40 and major global indices.