The firm’s investment philosophy is based on the long-standing value-oriented investing principles originally taught by Benjamin Graham & David Dodd.
These principles are best described as viewing a security as a fractional ownership in the underlying business. This requires developing a thorough fundamental analysis of each business and its financial condition in order to establishing an appraised or estimated value of the enterprise. Investments are made only when a sufficient margin exists between a stock’s quoted price and the analyst’s estimated value. This important part of value-oriented investment principle is referred to as a Margin of Safety, and accounts for the imprecision of market pricing and financial estimates.
We strive to invest in companies, not trade in and out of stocks. We seek to initiate investments which we believe have fallen out of favor with market participants, thus creating a temporarily undervalued investment opportunity. Our aim is to exploit inefficiencies we believe are inherent in the capital markets as a result of the misinterpretation of information. In our view, the increase in algorithmic trading and instantaneous decisions made based on superficial news flow has increased inefficiencies.
Our goal is to arbitrage discrepancies between price and value when these inefficiencies occur and create wide gaps between our appraised value and the last quoted stock price. We are patient, long-term investors willing to hold investments for years in order to maximize returns.
We concentrate on fundamental financial statement analysis, which allows us to avoid becoming swept up in the market hype that occasionally surrounds popular investments, and instead focus our efforts on understanding businesses and their intrinsic value.
Our investment process emphasizes long-term return potential and as such, we focus on developing a thorough understanding of each prospective investment before we commit capital. Our investment process includes reviewing historic financial statements as well as engaging company senior management in regular dialogue to more completely and continually appraise vision and leadership.
We manage separate portfolios for each of our investment clients. The client portfolios hold typically 18-22 equity securities, and 6-8 debt securities. This practice allows us to concentrate on our best investment ideas while closely monitoring all developments.
We invest in companies of all sizes, across industries, and geographies, seeking to understand the business fundamentals and those people responsible for creating and executing its strategy. We are well positioned for this, with research associates in the United States and India, allowing nearly 24/7 analytical activity.
Once we have developed a thorough understanding of the business, processed all available data, and committed capital, our investment process continues. We update and reconfirm our reasoning for each of our investments on an ongoing basis. We also continually communicate with senior management and other institutional investors who own the same security for as long as we hold an investment.
An important benefit of our thorough analysis and direct communication with senior management is that it creates opportunity for the firm to initiate “operational activist” strategies if necessary. We have affected operational changes, including proposing new senior management, business strategies, mergers & acquisitions, as well as replacing company board directors if we believe these activities will positively impact long-term shareholder value.