InsightsCharacteristics We Look for in Our Investments

We are value investors that focus our portfolio on a limited number of excellent companies. After careful due diligence, we invest with conviction and significant weightings. The companies in our portfolio have the following characteristics: a high percentage of recurring revenue, earnings growth, stable margins, high barriers to entry and limited competition. They generate significant free cash flow, have a high degree of financial flexibility as a result of their excellent balance sheets and trade far below our estimates of their intrinsic value.

The CEOs of our businesses excel at capital allocation. We have been pleased to see many of the companies in our portfolio use their free cash flow to buy back meaningful quantities of stock, increase dividends, and make strategic, highly accretive acquisitions. Such uses of capital
increase our overall returns.

Our portfolio is dominated by businesses that are flush with cash, have low capital requirements, have pricing power and, by and large, sell business critical or nondiscretionary services. They are adaptable entities run by smart businesspeople. Buying and holding businesses with these characteristics is an excellent way to accumulate wealth.