InsightsApproach Investing as Owning a Fractional Share of a Business

We are bottom-up, concentrated, long-term value investors. We buy only our best ideas, and only when they are cheap, and do not diversify just for the sake of diversification. When we buy a stock, we consider ourselves to be purchasing a fractional share of a business, not a piece of paper that trades or a quote on a computer screen or tickertape.

As business owners, we realize that time is required to build and realize value. We remain confident that buying cheap, staying focused on a limited number of companies, being patient and approaching investing as a business owner rather than a speculator will yield solid long-term results.

We make it a practice to constantly review our investments, meeting and/or speaking with the managements of our portfolio holdings, and can confidently report that our companies continue to perform well. They continue to experience sales and earnings growth and generate significant free cash flow. They also continue to allocate capital wisely, returning excess capital to shareholders through dividends, buying back shares and investing in projects that generate high rates of return.

Mindful that a business is worth the present value of its future stream of free cash flow, we evaluate micro and macro changes in the context of how they might affect the free cash flow of the businesses we own. During market downdrafts, if we determine that future free cash flow of our businesses had not been impaired, we add opportunistically to our positions.

We invest with a private equity mindset. We do all of our work on the intellectual basis of actually owning 100% of each business we invest in – even though we are buying shares of a public company. We seek companies with superior economics and sustainable competitive advantages that are well run and well capitalized. Our time horizon for value creation is long (at least five years). There are headwinds and tailwinds for each business of course, but overall, substantial long-term value continues to be created. This mindset helps us avoid short-term thinking and reacting to volatility in the stock market (other than to take advantage of it) – something which has served us well over time, and will continue to do so in the future.