Our Core Principles

 

Intrinsic Value and Margin of Safety:

 

We focus on calculating the intrinsic value of a company based off current and predicted future earnings power. This involves assessing the company’s financial health, asset base, and growth potential. We look for opportunities trading at a discount to this intrinsic value, ensuring a "margin of safety" — a cushion that minimizes the downside risk in case market conditions or company performance do not meet expectations.

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Business Fundamentals:

 

Poor Richard’s approach places a heavy emphasis on analyzing core business fundamentals. This includes understanding the company’s business model, competitive advantages, profitability, growth prospects, and its ability to generate consistent free and operating cash flow. Companies with strong fundamentals, a history of stability, and clear paths to create value for the equity holder are prioritized. Our focus is on long-term value accretion rather than short-term gains.

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Management Quality:

 

The firm also pays significant attention to the quality of a company’s management. The competence and integrity of management can make or break a company’s long-term success. We evaluate management based on their capital allocation track record, strategic operating decisions, and alignment with shareholder interests. We look for leaders who are disciplined capital allocators, capable of navigating challenges and capitalizing on growth opportunities.

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Capital Structure:

 

The capital structure — how a company finances its operations through debt and equity — is another key area of focus. We seeks companies with balanced and prudent capital structures, avoiding those excessively reliant on debt or with overly complex financial arrangements. A strong balance sheet allows companies to weather economic downturns and invest in opportunities when they arise. Additionally, the firm analyzes how companies manage their capital to ensure that funds are allocated efficiently to maximize shareholder value.

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Risk-Adjusted Returns:

 

While value investing generally focuses on undervalued companies, we focus on evaluating investment opportunities based not only on price but also on risk-adjusted returns. We seek to allocate capital into investments with asymmetrical reward propositions, looking for opportunities that trade at a significant discount to intrinsic value, analyzing the volatility of individual securities and broader market conditions to ensure that the investments provide an adequate return relative to the risk undertaken. 

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Long-Term Focus:

 

A hallmark of our investment approach is our long-term perspective. We believe that value investing is a patient process and seek investments that can grow over time, rather than speculative trades driven by short-term market trends. This mindset reflects Graham’s philosophy of purchasing undervalued securities with a long-term outlook, allowing the true value of the business to eventually be realized. 

 

 

Disciplined Research:

 

We adhere to a rigorous bottom-up research process that blends fundamental analysis with qualitative macroeconomic assessments. We rely on deep independent fundamental research to uncover opportunities that become overlooked or misunderstood by other market participants.