Four distinctive principles guide our approach to investment selection: fundamental research, long-term perspective, individual decision-making, and value.
First, we are committed to fundamental research. The primary objective of our research is to develop opinions independent of Wall Street and to understand the companies we follow as well as any industry analyst. We look for stocks where we believe the underlying company's long-term fundamentals will evolve significantly better than the current Wall Street consensus or valuation suggests. This can be a function of greater expectations we have for new products, new markets, new management, changing industry dynamics, etc. Our research involves interacting directly with the companies we are reviewing, their competitors, suppliers, and customers.
Second, we take a long-term perspective. We look for stocks that will outperform the market over a three- to five-year time horizon. We strive to recognize values early and patiently wait for the market to reach a similar conclusion. Often, our search begins with companies and industries that are currently out of favor among investors. Consequently, our investment ideas are frequently early. However, conviction derived through our research efforts gives us the fortitude to stay the course when the near-term fundamentals are challenging if we believe the long-term thesis is intact.
Third, we emphasize individual decision-making. We shun "group think" and committees whenever possible, and rely on individual decision-making in our investment process. We believe that individuals generate the best investment ideas, not committees.
Ultimately, the key to successful investment decisions rests in correctly appraising the relationship between the fundamental value of a company and the market price of its stock. A company may be valuable because of its ability to make money, its assets, or both. However, a company is a good investment only if it is purchased at the right price.