For us, the risk of an investment in a company does not lie in the volatility of its share price but in its fundamentals. Like an entrepreneur who is considering taking over an unlisted company and is carefully scrutinizing its fundamentals, we do not stay glued to our Bloomberg screen but apply a golden rule consisting in understanding the companies’ business and fundamentals prior to any investment.
Growing companies can be attractive investment opportunities, but experience has shown us that it is very difficult to properly value growth which is thus not a relevant investment criteria for us. Therefore, in line with Benjamin Graham’s philosophy, we put a large emphasis on the “earnings power” and “margin of safety” concepts. Through the earnings power, we are focusing on the quantity of cash a company needs to maintain its activity. In the same time, we only invest in companies benefiting from strong earnings power and which share price is trading at a sufficient discount (min. 40%) compared to our target price.
We are not traders, our investments are founded on convictions and made with a long-term investment horizon. Similarly, in order not to reduce our investment universe, we want to keep a high degree of flexibility in terms of geographical, sectoral and market capitalisation allocation. Our portfolio is concentrated and focuses on our main convictions in which we invest for a period of 4 to 5 years in order to allow the market (Mr. Market as Benjamin Graham called it) to recognise the earnings power of our underlying companies.