Our Investment Philosophy rests on the fundamental idea of Resilience. Hence, we look to own companies that have 3 key traits

 

1. Resilient business with a long runway to grow  

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We define resilient businesses as companies that can fend off competition and have a consistent track record of generating high returns on invested capital. Such companies tend to have business models with high entry barriers which stem from the following sources

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• Brand perception

• Network effects

• High switching costs

• Economies of scale

• Intellectual property / R&D

 

Within the universe of businesses that have high resilience, we look for businesses that have long runway to grow, thereby giving them opportunities to redeploy cash flows back into their business at high incremental ROCE

 

2. High-Quality Management

 

We judge management quality on 3 key parameters

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• Historical track record of execution

• Vision for the business

• Integrity  

 

We evaluate the available history of management’s actions and their track record of execution and capital allocation decisions. Additionally, using forensic accounting and other primary and secondary checks, we also gauge their integrity. We look for a strong alignment of interests of minority shareholders and operators of the business

 

3. Attractive Valuation

 

Among the businesses which are resilient and are run by good management teams, we look to buy businesses that are also reasonably valued. We consider the size of the competitive advantage and earnings power of the business relative to other businesses, its longevity of the industry, the rate of change in the industry, and specific catalysts in the business to arrive at a range of prices where we find the business worth owning and expect high rates of compounding