Our investment strategy
Disciplined insistence on a wide margin of safety
We only invest in companies that are trading at material discounts to their intrinsic value. Our hurdle for investing is believing the investment can conservatively generate at least 25% annualised returns over a multi-year period.
We invest within a tightly defined circle of competence. We only invest in businesses where we can gain deep conviction in (i) the underlying businesses’ operating drivers and likely mid- to long-term cash flows, and (ii) the reasons the market is mispricing the reward vs. risk profile of the investment opportunity.
Multi-year, fundamental change is often mispriced
Investors often struggle to see beyond ‘what currently is’ to ‘what could be'. Innate cognitive and behavioural biases mean they often think too linearly, don't think probabilistically or miss latent optionality in businesses.
We invest in companies going through multi-year fundamental change, which offer a rich source of high-return, low-risk opportunities. Examples we seek out include changes to (i) business' long-term growth prospects, returns on capital, margins, capital structure, corporate structure, or corporate strategy, or (ii) broader industry / competitive dynamics. We typically invest for two to four years on the long side and one to two years on the short side.
Deep fundamental research allows for high-conviction
We conduct intensive fundamental research. We invest in and short businesses that we know in great detail, within regions and industry sectors where we have deep expertise. This depth of research, combined with our systematised investment process, is how we gain the conviction to concentrate capital in the most outstanding reward vs. risks.
We focus on European mid-sized companies. This allows us to be extremely close to the management teams and companies we invest in. This investable universe is also becoming increasingly mispriced, as a result of structural changes that are leading to reduced coverage from investors and analysts (e.g. MIFID II).