We invest in US-listed companies, almost entirely through common stock, for long-term capital appreciation. Research is done in-house. We compare what a business is worth with what the market is asking us to pay, and we only buy when the gap is attractive.

Risk is built into stock selection and into the portfolio. We define risk as permanent loss of capital, not day-to-day price swings.

We look for companies with these characteristics:

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1. High free cash flow to the firm (FCFF) versus the share price — cash left after the business has funded itself, relative to what we pay. That is free-cash-flow yield.

2. Stable FCFF — cash generation that is predictable, not a one-year spike.

3. Growing FCFF — a record of cash flow rising over time.

4. Growing operating revenue — the top line compounding, not just cost-cutting.

5. A business we can explain simply — if we cannot describe how it makes money in a few sentences, we pass.

6. A durable industry position — companies that have come through downturns stronger, not weaker.

7. High returns on capital — strong margins and returns on the capital the business actually uses.

8. A lasting competitive advantage — the ability to defend the franchise and raise prices with inflation without giving up share.

9. A strong balance sheet — moderate leverage and the capacity to absorb a bad year.

10. Trustworthy management — a record of competent capital allocation, and no reason to doubt integrity.

 

No name has to score a perfect ten. The test is whether the cash-flow yield, the durability of that cash, and the people running the firm compensate us for what can go wrong.

Portfolios are built from our highest-conviction names that clear this bar. They are concentrated enough that the best ideas matter, and diversified enough that a single error is not fatal. We would rather hold cash than force a purchase that fails the process.