Our Midwestern location sets us apart from the emotions and short-term views of Wall Street. This physical and psychological distance allows us to patiently and thoroughly inspect and select each investment as if we were going to buy the entire company. Our goal is to maximize long-term total return. We also understand that prudent investors want to minimize risk and protect their assets.
What this means is that we adhere to specific investment criteria. When we invest we don’t just review stocks, we evaluate businesses.
Patience is a key element of our philosophy. Various research studies have shown that the average investor significantly under-performs the overall market because they let their emotions get in the way of rational decision making. They chase the latest fads with the typical result being that they miss the upswing and their gains are substantially less than what they would have been if they had just stayed the course.
While our style may lag the market in periods of “irrational exuberance,” we try to provide an extra measure of protection during bear markets. We hope to gain your trust so that you remain patient and confident even during difficult times.
Our investment style is often described as contrarian because it is a patient, disciplined, long-term approach that does not focus on the stock market and its emotional roller coaster ride. Wall Street’s short-term views do not sway our Main Street long-term goals. We believe that following the crowd is not a sound plan for achieving financial success.
- We identify distinct companies that meet our investment criteria and are undervalued.
- We thoroughly analyze every aspect of the company, its industry and competition.
- We confirm investment ideas through a collaborative effort of the investment team.
- We select the companies we believe appear to offer the best potential return for the risk being taken.
In order to achieve our investors’ long-term goals, at the center of our research is a precise process we follow consistently – a repeatable pattern that guides us as we invest for lasting value. When we seek consistent high quality company stocks, we look for:
- Good businesses that we understand, have a competitive advantage and possess high profit margins.
- Companies that have little or no debt, free cash flow, and deploy capital wisely.
- Firms with superior management teams; leaders who are honest, ethical, energetic and have a strong track record of increasing the value of their organizations.
- Businesses we can buy at a discount to our estimate of value – what is known as margin of safety.
We sell a company’s stock when:
- The valuation is so high that the expected return falls below alternatives.
- The valuation is well above long-term historical average multiples.
- The economics of the business are deteriorating.
- The original thesis for owning the stock is no longer valid.