We invest in businesses that we believe possess distinct competitive advantages which include: high barriers to entry, limited competition, strong financial position, high returns on capital, and consistent and growing free cash flow generation. Historically we have found businesses with sustainable competitive advantages earn a disproportionate share of industry profits and investment returns.
We seek able and proven management teams that can articulate and implement the required strategies to maintain competitive positioning. Management teams must also possess a shareholder-oriented mentality that includes returning excess capital to the owners of the business: the shareholders.
We require entry prices that are considerably less than what we believe the companies are worth. We demand a “margin of safety” so that our client capital is protected against unforeseen risks. The degree of this discount is an integral factor in determining the amount of client capital allocated to a particular investment.
``Investment is most intelligent when it is most businesslike.``
-Benjamin Graham; The Intelligent Investor, 1949