Our Investment Ideas

Our process begins with a thesis as to why a particular company may grow profitably for the long term. Note that we aren't just seeking growth for growth's sake. We are looking for companies who grow and have great economics to their business - high margins, lots of free cash flow, strong balance sheets and high returns on capital. Also note that we are looking for long term growth; companies that are not a "flash in the pan".

This sort of long term growth company tends to have unique competitive advantages in its market, often in the form of intellectual capital. Successful companies' advantages are nurtured by a culture that allows employees to seize opportunities. In our experience, making all this work comes down to the quality of management at a company.

A solid thesis becomes a useful investment idea if our views of the company are not widely held by others. It is difficult to find a good company at a good price when the whole world is enthusiastic about the prospects.

Much of our work centres around reasons why the market consensus may change. Is a company’s new management having an as-yet unseen impact? Is a new product going to change the growth trajectory? Is demand turning around for a service that had been out of favour? Are competitors changing their behaviour? Finding answers to these sorts of questions can be very valuable.

If we can build a unique thesis on a high-quality company, and we can buy the company at a good price, we will become owners. We then constantly monitor the situation to test and confirm our thesis.

We will sell an investment if we have lost our confidence in the management team, can no longer support our thesis, if there is a significant long-term negative change in the business, or if the price has increased to a point where the business is overvalued by a large premium to our assessment of fair value.