Our Investment Approach
As the stewards of our shareholders’ capital, we focus on preservation of capital first and foremost. This discipline has led us to invest in securities where we believe the potential price depreciation is limited and the potential upside is substantial. To identify such investments, we conduct a thorough, bottom-up analysis of a company’s financial statements, business model, and quality of management. When we invest in companies, we do so with a long-term time horizon; we are not traders speculating on short-term moves. Rather, we view our investment commitments as if we were purchasing the entire company rather than a small minority stake. The fundamental characteristics of our investment process include the following:
- We consider the strength of the economy and overall market conditions, but we are ultimately bottom-up rather than top-down investors.
- We seek out quality companies with healthy balance sheets, positive cash flows, solid business models, and strong management.
- We tend to be contrarian investors by purchasing stocks of companies that we believe are only temporarily out-of-favor.
- We search for responsible management teams that are focused on delivering long-term value to their customers.
We are long-term investors who recognize that value is not created in a single quarter or even in a single year. Long-term, enduring value is created over years of hard work with smart decisions and prudent long-range planning. As the adviser to Appleseed, we examine a company’s Environmental, Social, and Governance (ESG) factors when we evaluate an investment, when we communicate with management, and when we vote on shareholder initiatives.
By considering environmental, social, and governance performance when we invest, we believe we can reduce our investment risks. When a company focuses on improving its safety performance, it reduces the risk of a safety-related lawsuit. When a management team is already looking to improve its own environmental performance, the likelihood of a large environmental-related liability is diminished. When management incentives are properly aligned with shareholders, managers are less likely to risk a company’s competitive positioning for a short-term gain of the stock price.
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