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. The firm looks 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 the 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 growth are prioritized. The focus is on long-term value creation 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. In value investing, 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. Poor Richard 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 toward growth or shareholder returns.

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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 mitigate risk through aquisition at prices at a signficiant discount to intrisic value, analyzing the volatility of individual securities and the 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 be realized gradually. 

 

 

Disciplined Research:

 

We adhere to a rigorous bottom-up research process that blends fundamental analysis with qualitative macroeconomic assessments. We rely on deep independant fundamental research to uncover opportunities that may be overlooked or misunderstood by the broader market. This research-driven approach helps us identify opportunities often overlooked by other market participants.