Our long term approach enables us to filter out, and take advantage of, the short term noise of the markets. This means that we often make investment decisions against the prevailing consensus, enabling us to buy and sell when the herd is looking the other way.
We look to buy when a company’s share price significantly understates its long term potential. No single valuation approach should be applied across different types of businesses, industrial sectors and geographic regions. Cash earnings are an important starting point in our analysis, closely followed by dividend yield, price to book value and return on capital. Balance sheet strength is also critical in avoiding large losses.
We operate a strict selling discipline. If we believe that a stock is overvalued, where investor expectations are too high, or the fundamentals have changed - or that we simply got it wrong - we will sell.