When we invest on the stock markets, we treat our investment as though we were taking a stake in the company's capital. We are therefore resolutely focused on a long-term investment horizon, and somewhat detached from day-to-day movements on the markets. Decisions are strongly conviction-based in order to reduce the number of errors.
In terms of company selection, we seek quality companies whose tangible and sustainable competitive advantage sets them apart from their competitors. The competitive advantage provides the company with a strong return on capital invested, which is a key driver of strong free cash flow.
Particular focus is also given to the company's valuation. We only invest in companies if their share price offers a sufficient discount to the company's intrinsic value. This provides a margin of safety should events take a turn for the worse. The price paid for the company at the time of investing determines the future return on the investment.
By focusing on a restricted number of quality companies and maintaining a long-term investment horizon, we keep the portfolio turnover rate low and aim to outperform the market with less volatility.
