Our focus is on analyzing balance sheet risk, business model durability and managements' capital allocation decisions.
Abhay Deshpande, CFA
Chief Investment Officer
Time Horizon
- Long-term investment horizon
- Emphasis on long-term earnings power, rather than current earnings
Margin of Safety and Intrinsic Value
- Invest in a security after we have determined that the market price is lower than the intrinsic value, the difference being our margin of safety
- Margin of safety affords us a cushion to potentially avoid paying more for an asset than its intrinsic value
Seeking to Manage Risk through Bottom-Up Research
- In our opinion, it is important to avoid highly leveraged businesses, specifically because they are more exposed to an impairment of value during periods of industry or economic distress
- Focus our efforts on understanding the likelihood of a change in the earnings power of a business due to changing competitive dynamics, technological challenges and regulations, among other factors
- In most cases, we will avoid shareholder-unfriendly businesses as it relates to management’s capital allocation decisions
General Market Risk Within a Bottom-Up Approach
- In environments with an insufficient margin of safety, fully invested portfolio mandates can become too exposed to the risk of loss by owning potentially overvalued securities, while a more flexible policy may help to reduce that risk by holding a reserve in cash and high-quality debt instruments