Investment Philosophy

Welcome to my blog, where I'll periodically publish investment memos for stocks held in my personal portfolio. 

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Public markets investing has taught me that stocks are forward-looking ownership interests in businesses. Any given day, the market tells investors via the share price what it expects from the business.  When looking at any potential investment, I make sure to not only understand what expectations are embedded in a stock but also what the business has to do to beat those expectations. It is our challenge as investors to determine whether these expectations are rational or not.

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I also tend to focus on smaller, under-followed companies that allow me to add value through primary research. I have no business competing with the hundreds of analysts that carefully scrutinize >$100b companies.

 

Ultimately, successful investments are driven by 2-3 key variables. While the pitches in this site are relatively short, they focus on the variables that I believe will act as catalyzers for their return - quality over quantity.

 

That said, I am guided by three core investment principles:

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Price: The risk of an investment is not determined by its historical volatility - it is determined by the price paid. Diligently study a business and wait patiently until the market offers an opportunity to enter an investment at a price that limits its downside risk.

 

Return on incremental invested capital: I look for companies with sustainable reinvestment runways. If a company is not distributing capital back to its shareholders, it should be investing today's earnings at a rate of return greater than its opportunity cost.

 

Insider ownership: Minority share ownership implies trusting our capital with a skilled manager. We look for companies where senior management owns a significant portion of the outstanding equity relative to their net worth and is incentivized to increase the value of their business on a per-share basis.