We believe that dependable and successful long-term investment results are the outcome of a disciplined and concentrated investment approach.  In our view, investors that lack discipline are destined to underperform.  Investing is in many ways a negative process – if we only need to invest in 20 or so companies out of the 15,000 that are available, we can be extremely picky.

We allocate our capital to securities that have a significant margin of safety and specifically meet our investment framework (“CISSEMT”), which consists of the following criteria:

1. Catalyst: Identifiable catalyst or foreseeable event to positively refocus investor attention
2.  Important: Excellent franchise businesses that maintain a strong and growing competitive advantage;       operate in superior industries with significant barriers to entry
3. Secular: Maintain a strong long-term secular growth profile
4. Score: Valuation has never been cheaper, indicating current expectations are low; safe balance sheet
5. Expectancy: Asymmetric risk/reward - high returns relative to the low risk taken
6. Management: Management team whom we trust and who have a shareholder return focus
7. Technical: Stock moving from weak shareholder base to strong, patient shareholders

A key element to our investment philosophy is acquiring securities with a significant margin of safety by paying far less for a security than what it is worth.  We are just as focused on asking ‘how much will we lose if we are wrong?’ as we are on asking ‘how much will we make if we are right?’.

It is challenging to find ideas that meet all of our criteria, but if we apply this discipline successfully it will result in an extremely high quality, concentrated portfolio with asymmetrical risk/reward.

For a more detailed discussion on our investment discipline (“CISSEMT”) please click here.