Risk Management

We spend as much time and effort trying to avoid permanent loss of capital as we do trying to generate attractive returns. We make our share of investing mistakes, but trying to avoid undue risk is a key part of our investment process.

  • Valuation:  Our most useful risk management tool is our discipline of making investments at substantially discounted prices compared to our intrinsic value estimates. By only making investments where the price we pay for a company’s shares is sufficiently discounted compared to our independent estimate of intrinsic value, we believe we limit our overall downside risk. We stress-test valuation estimates by looking at worst case revenues and also deteriorating profit margin scenarios.
  • Quality: We strive to own high quality companies with principled managers that run their companies in a responsible manner to reduce risk, and we have navigated client capital through multiple challenging investing environments.
  • Knowledge: During our research process, we make every effort to uncover ways our investment thesis might go wrong. Once we take a position, our investment committee and our analysts constantly challenge the underlying assumptions of our investment thesis for each portfolio investment. Our analysts monitor portfolio holdings intensively via SEC filings, quarterly conference calls, and meetings with management.