Our differentiated methodology is borne out of decades of experience and three critical observations:
We seek to exploit the modern drivers of pricing inefficiency by measuring and contextualizing Cost-of-Risk, or the premium investors require to embrace uncertainty. Specifically, we examine the statistical relationships and patterns of equity risk premiums across various cycles and economic landscapes to identify areas of the market that are potentially mispriced today. Outliers and material deviations from trend point to market segments where risk may be over-represented in current prices and where deeper fundamental examination/scrutiny is called for.
Companies in the same orbit rarely share identical levels of opportunity and risk. We employ specific quality and value criteria at the sector level to refine our focus, further narrowing potential investment opportunities to those companies we believe have the highest capital appreciation prospects relative to their peers. The criteria we use have been curated over decades and incorporate our experience and industry study as well as countless executive interviews on internal capital allocation considerations (i.e., M&A frameworks, R&D criteria, capex expansions, share repurchase considerations, etc.) and the most reliable drivers of fundamental value creation.
A central focus within our fundamental underwriting is that businesses need to have an edge to compete and win. We believe the best businesses solve a problem, understand that they must compete or submit, and have a culture that attracts, develops, and retains talent across the demographic spectrum. Grounded in our heritage as bottom-up fundamental investors, our rigorous and multi-faceted research identifies companies that dominate attractive, relevant, and growing niches yet whose potential is misunderstood by the market.
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