One of the primary metrics that we use to determine the quality of a business is the return that it earns on tangible capital (we refer to this as ROC). Tangible capital is the sum of net working capital and net property, plant and equipment. A high ROC generally indicates that a business benefits from …
There are 3,500 publicly traded companies in the U.S. alone, and all of their stock prices are constantly changing. Typically, our portfolio consists of less than 10 stocks. In order to narrow down the universe of potential investments, we begin our search process by looking at those companies trading at the lowest multiples of earnings. …
To invest is to forego consumption today in order to be able to consume more in the future. The risk one takes when investing is that this goal is not achieved, or that the whole endeavor turns out to be counter-productive to the goal. In other words, an asset’s riskiness derives from the probability that …
Our investment strategy rests on the conviction that the price of a stock will converge to its intrinsic value over the long run. It stands to reason then that the most attractive investment opportunities would be in those situations where there exists the greatest discrepancies between price and value. For reasons discussed in our essay …
The idea that what you pay (price) can deviate significantly from what you get (value) in the short term underpins our investment philosophy. We believe that we can profit by taking advantage of this discrepancy. So far our positions have consisted exclusively of long positions, where we buy a stock at a price under our …
