WHY US

WHAT DIFFERENTIATES US?

We believe in concentrated portfolio of stocks – Our investing style is mirrored from legendary investors such as Mr. Warren Buffet, Mr. Charlie Munger and Mr. Phil Fisher and therefore believe in having a concentrated portfolio of few stocks to generate best returns over the longer term. In our humble opinion, there is no need for investors to own dozens of stocks in a portfolio as this only reduces expected returns and leads to ‘di-worsification’. As Tom Murphy who ran Capital Cities/ABC once said “The goal is not to find ways to make the train longer but to find ways to make it run faster.”

We view risk differently – Whilst many classify price volatility as risk and adjust their portfolios to minimise the drawdowns on a regular basis thereby increasing transaction costs in the process, we do not attempt to control volatility relative to any benchmark. We believe, this price-based, short-term mentality is a flawed way of thinking about risk. Whilst short-term volatility can never be eliminated by the very nature of the global macro events happening real time, we can certainly minimise company risk by doing extensive research via qualitative and quantitative analysis.

We do not make stock selection based on macro views – We do not believe in predicting economic cycles nor market outlook to allocate capital based on what sector will outperform in the short-term. Extrapolating current trends and projecting it linearly via DCF analysis in a cyclical world is just not our style of investing. In fact, we stay far from it. Our calculation of intrinsic value is based more on qualitative factors such as brand strength, pricing power, long-term growth drivers, barriers to entry, integrity of the management, capital allocation policies, competitive landscape to name a few.

Simplicity –We are looking for businesses that are compounding machines i.e., businesses that can generate high free cash flows and then reinvest it at higher rates of return without taking on much leverage. We have a long-term holding period of over five years. We invest in public companies with mind-set of owning a private company and so the daily price movements become insignificant as long as the fundamentals of the business remains strong. For us, it is all about securing the destination.

Discipline – We follow three disciplines in our investment process.

1) Staying within our circle of competence: We stick to the areas we know the best. Moreover, we do not invest in companies which use high leverage, need high capex, can be influenced by the govt. either through increasing regulations or increasing sector specific taxes or that are highly dependent on innovation to drive future growth.

2) Cost discipline: We do not like to overpay. A great company at extremely high valuation will not generate a good return over the longer term.

3) Being dull in a dynamic environment: There is always an urge among investment professionals to find the next “hot” stock or a start-up company that will be a game changer. We do not like playing this game of treasure hunt. In fact, we only invest in quality companies that have been established for decades and have been improving sales and profits over the longer term. For us, capital preservation is key.