Investment Philosophy

Investment Selection

Investment Case Studies

Successful investing is as much about avoiding losers as it is about selecting winners. While we possess no magic formulas, we believe you maximize the probability for investment success by investing in businesses with favourable economic characteristics at attractive prices, and avoiding businesses that operate in industries with challenging dynamics and future prospects.

Our investment selection process specifically focuses on the following:

Profitability and Cash Flow

We’re focused on companies that have healthy profit margins, which they are able to consistently convert into cash. We also think it is important to invest in companies with high rates of return on invested capital as this is indicative of a profitable business model. Companies that struggle to earn a rate of return on invested capital in excess of their cost of capital are usually unsuccessful over the long term.

Long-term Stability

We favour “steady eddy” businesses that aren’t exposed to material structural shifts within their operating environment. This often means investing in businesses with barriers to entry, strong recurring revenue and “sticky” customer relationships. Historically, we’ve been averse to investing in companies in commodity-sensitive sectors like energy and mining. Companies in these sectors have a minimal ability to control the selling price of their products, which can make for a difficult operating environment when combined with their need to undertake expensive capital projects. We also avoid industries where the pace of change is so rapid that it is difficult to predict what primary products and services a company will be selling in a few years’ time.

Managerial Competence

We regularly interact with company executives to determine investment suitability. Digging through financial disclosures is not enough for us. Speaking directly to management provides a layer of insight that helps us round out our investment thesis. We look for managers who have demonstrated competence with regard to track record, capital allocation and governance. If possible, we prefer management teams who are significant shareholders of the businesses they operate.


We assess the value of a business based on our estimate of future profits and cash flow. Valuation is perhaps the most difficult part of the investment selection process, as great businesses with the characteristics we seek often trade at expensive valuations. We tirelessly seek to invest in businesses with a margin of safety, whereby the current share price is less than our estimate of a company’s intrinsic value. This isn’t an easy task, but we find that opportunities present themselves when we develop a deep understanding of a business. Our approach allows us to take a long-term view that looks beyond short-term “noise” in the market, which may be depressing a company’s current share price. We have also shown a willingness to hold cash in our portfolios while we wait for opportunities to surface.