Put simply, we want to buy shares for much less than they are worth. Shares are nothing more than fractional ownership interests in a business. If our analysts can truly understand the fundamentals of a given company, we can determine whether the price the stockmarket is offering is cheap or expensive relative to the intrinsic value of the business.
Compelling investment opportunities often arise when investors place too much emphasis on short-term developments at the expense of long-term fundamentals. As the video illustrates, capitalising on excessive pessimism lies at the heart of our investment philosophy. We believe that share prices must ultimately reflect intrinsic value and we are prepared to wait patiently until our investment thesis plays out. We recognise that even the best stockpickers tend to be wrong about 40% of the time, so we seek to mitigate permanent losses of our clients’ capital when this occurs.
It is a simple philosophy to grasp, but difficult to execute. We have deliberately structured the firm to enable us to make decisions that are consistent with this philosophy. This includes an alignment of interests with clients, a culture of individual accountability and a focus on sustainability.