5 principles we follow to make decisions.
Moat Compounding
We prioritize businesses with structural moats—switching costs, network effects, scale, or regulatory embed—that show up in cash, not just stories. When moats are real, unit economics widen with time and market share, creating self-reinforcing compounding. We want simple models where the cost to switch is measurable in time, dollars, or compliance risk and customers quietly choose to stay. If ROIC sits above the cost of capital through a cycle and pricing power holds, we let compounding do the talking.
Long-Term Positions
Turnover is the tax on compounding; we build positions we can hold 5–10 years. Selling is reserved for thesis breaks, persistently worse unit economics, or a clearly superior opportunity at a discount. We prefer predictable cash engines to hot narratives, even if they’re less exciting quarter to quarter. Position size scales with conviction and downside protection, not headlines.
Undervalued Assets
We buy quality assets below intrinsic value with a clear margin of safety—the classic Graham/“Intelligent Investor” play. Mispricings often stem from temporary issues, unloved sectors, or neglected niches where sentiment miscalculates. Intrinsic value is built from mid-cycle owner earnings and conservative growth, not story multiples. We wait for the gap to close via mean reversion, operational fixes, or capital return, and get paid to be patient.
Owner-Operators
When possible, we try to back owner-operators who think in per-share value. We believe that great allocators reinvest at high ROIC, repurchase shares when cheap, and avoid trophy M&A. Incentives and candor matter more than charisma or slideware. If stewardship reliably compounds per-share cash over time, we let the scoreboard run.
Financials
We prefer businesses with top-tier margins, durable operating leverage, clean balance sheets, and steady free cash flow. Customer love shows up as high retention and quiet pricing power that doesn’t dent loyalty. Leadership thinks hard about scope and capital—fewer bets, higher conviction, per-share value first. These are sleep-well compounds we hold while cash generation and stickiness do the heavy lifting.