Our process starts with valuations. We look for where the potential bargains are in asset classes, in world markets and especially in individual companies for it is on the proverbial bargain table where we believe that excess market risks may have been already minimized. This means looking for such things as lower Price-to-Sales, Price-to-Cash Flow, Price-to-Book and Price-to-future earnings ratios, among many other factors.
We also attempt to identify where a company’s business risks may be lessened. This means looking for, what we believe are, solid balance sheets, strong assets, modest liabilities, and well-rooted market shares.
That said, even the least expensive company with the strongest balance sheet may be no bargain if that company’s business is in decline. So, we look for growing and needed products and services with managements which we believe are committed to growth, incented to stay, and savvy-enough to strongly build their businesses in a highly competitive world.
Finally, we look for confirmation that our homework is being echoed by other significant investors and that others are awakening to the potential value of these companies so that we won’t be sitting forever alone waiting for our finds to be discovered and rewarded.
Investment Process – Buy
On the sell side, we look for broad awareness of the success of our investments for evidence that a company is reaching its potential and that the final elements of the investing herd feel confident about stepping in.
Investment Process – Sell