For over a decade we have been investing based purely on teachings of Benjamin Graham and Warren Buffett. We have diligently followed the principles of value-investing and found it extremely rewarding. The goal of any investment is to put money in now with an expectation of an adequate return in the future. We keep it that simple and strictly adhere to the 2 golden rules of investing - 1) Never lose capital and 2) Never forget rule #1.
We have no master strategy in our investment approach. We quite simply focus on 2 investment objectives:
I. To take partial interests in value-driven opportunities through the purchase of stocks in the open market:
Our equity investments are heavily concentrated in a few companies which are selected based on favorable economic characteristics, competent and honest management, and a purchase price attractive when measured against the yardstick of value to a private owner. Our simple goal is to invest in high return businesses run for the shareholders. It is difficult to find investments meeting such a test, and that is one reason for our concentration of holdings.
We pretty much follow what Buffett had said - "what we really like to see is a condition where the company we are interested in investing is making substantial progress in terms of improving earnings, increasing asset values etc., but where the market price of the stock is doing very little while we continue to acquire it. This doesn't do much for our short-term performance, particularly relative to a rising market, but it is a comfortable and logical producer of longer-term profits. Such activity should usually result in either appreciation of market prices from external factors or the acquisition by us of a controlling position in a business at a bargain price". We are comfortable with either alternative.
II. To take full ownership of businesses which meet the following criteria:
(1) small purchases of $1-2 million of after-tax earnings
(2) businesses that are simple and easy to understand
(3) demonstrated consistent earning power (future projections are of little interest to us)
(4) businesses earning good returns of equity while employing little or no debt
(5) management in place (we can't supply it)
(6) an offering price (we don't want to waste time in any discussions when price is unknown)
Our goal is to remain true to this vision and relentlessly focus our efforts throughout our lifetime on these two principles.