Living in a global economy, we endeavor to avoid home country bias. Many U.S. investors invest a disproportionate amount of their portfolio in U.S. based securities. We offer strategies unconstrained by geography, as well as a U.S. only strategy, providing flexibility for our investors.
Potential investments are carefully parsed to detect downside risk. Our portfolios are constructed with these in mind - including the effect of economic and credit cycles.
Active management should be just that: active. We hold enough securities to reap the benefits of diversification, but avoid holding so many securities that it dilutes manager skill. This produces portfolios with high active share.
Eliminate securities which we believe are very likely to be overpriced based on multiples of company metrics. These metrics can vary based on industry, sector, or geography. This allows us to avoid market exuberance and focus on companies that have proven ability to generate sales, earnings, and cash flows.
While we are bottom-up investors, there are certain secular trends that color our opinion of companies, industries, and geographies. We use these as a guide when looking at companies' bottom-up fundamentals like growth prospects and balance sheets, avoiding investments that have exposure to long term fundamental decay.
Value is more than a multiple. Each company has its own set of fundamentals which provides information such as the company's growth prospects and position in the competitive landscape. Using this information, we attempt to determine the intrinsic value of a company, contrasting this value to the price that the market is providing.
Many companies have low multiples and mediocre fundamentals, but never reach their price potential (the classic "value trap"). In order to avoid these traps, we look for opportunities in which there is a determinable "catalyst" - something which has the potential to unlock the hidden value in the company and force the market to reprice the stock to its intrinsic value.
Typically, our portfolios hold between 35 and 50 securities - enough to reap the benefits of diversification without over-diversifying and diluting manager skill. We hold our securities with conviction - on average for 3-5 years - cutting down on friction costs and allowing our ideas to reach their full potential.
We exercise sell discipline - only selling when we believe the price no longer gives us an attractive opportunity for the company. Positions can be pared down in the event that they become too large in comparison with the rest of the portfolio. All of our securities are monitored constantly for any deterioration in investment thesis.