Focus on the fundamentals
Investors are regularly bombarded with dubious claims of investment success, “tips” from their brother-in-law or a colleague, or firms claiming to have discovered a new and improved way to invest.
Therefore, we ignore the noise and focus on what is the only reliable and repeatable way to invest successfully over the long-term. At the most basic level, when we buy a security, we are simply paying for its future earnings or cash flow. We focus on being owners of companies with:
- Predictable free cash flow
- Sustainable and growing earnings
- Reasonable and responsible levels of debt
- Leaders in their industry with an enduring competitive advantage
- History or rewarding investors with dividends
Similarly, we hire fund managers who are aligned with this approach to security selection. Also, price is a critical component of investing. What an investor pays will either create a margin of safety and increased upside or if they overpay the potential for greater loss. Patient investors don’t overpay. Lastly, we won’t speculate on the latest marijuana or junior exploratory resource stock.