Even the most attractive business does not have unlimited value. Frequently, the market will have excessively optimistic or pessimistic expectations about a company’s prospects, which are often reflected in stock valuations. Our objective is to identify companies with outstanding profitability and growth characteristics, at times when the market does not fully appreciate them.
We always seek to pay a compelling price for the businesses in which we invest. A fundamental element of our research process is estimating what a potential investment is worth — that is, its intrinsic value. Alongside our company due diligence, we use several methods to derive that estimate. We consider traditional valuation metrics, but we also generate an informed estimate of the economic profits a company can deliver now and into the future. We only invest client capital in companies which trade at a meaningful discount to our intrinsic value estimate, taking great care not to assume that every great company is also a great investment opportunity.