Investment philosophy
Focus
The company solely invests in quoted equity. The company’s investment policy is to invest in shares of small and mid-cap companies with a market capitalisation (at the time of investment) < 5 bn € with a focus on Europe.
Up to 1/3 of the portfolio is also invested in diversified investment holdings and large caps/blue chips (which helps to ensure the liquidity of our open-end investment fund).
The investment approach is to be a long-term investor – without short-term trading strategies – in approximately 25 to 35 companies.
The partnership focuses on investing in companies it believes can compound in value over many years. It seeks to achieve this by selecting companies that have an established track record.
Small- and midcap companies tend to out-perform large companies on the long run. In this segment there is also an investment opportunity to take advantage of greater discrepancies between the share price and valuation of these companies, in part due to lighter research coverage and less information being available on them.
Small/mid caps tend to have higher expected returns but also higher expected risk (defined as price volatility) when compared to larger companies. However, blending a small and mid cap portfolio with a portfolio of investment holdings and (to a lesser extent) large cap portfolio raises expected returns without increasing risk.
The investment manager seeks to invest in small- and midcap companies that exhibit a decent profitability that is sustainable over time and generate substantial cash flows that can be reinvested back into the business. Its strategy is not to overpay when buying the shares of such companies and then do as little dealing as possible in order to minimise the expenses of the company, allowing the investee companies’ returns to compound for shareholders.
Convictions
Independent company analysis
We spend our time analysing listed companies, taking an in-depth look at a.o. their competitive edge and the quality and durability of their business and assess their value. We invest in undervalued shares in businesses that are easy to understand at a lower price than their intrinsic value would warrant, i.e.. we give ourselves a wide safety margin.
Long-term horizon
We aim to buy undervalued assets to preserve the long-term purchasing power of our investors’ savings. We do not try to predict short-term shifts in the market, which are unpredictable to us. Rather, we look to the long-term performance of the assets we are interested in.
Patience is key
We analyse a company as if we were about to buy it as a whole . If the analysis checks out, we go ahead and invest. On the back of this, time works in our favour. We wait for as long as necessary until the quoted market price finally recognises the true value of the companies we invest in.
Permanent loss of capital is a risk, volatility is opportunity
Volatility is not really a risk for us ; the risk we want to avoid involves a permanent capital loss. Our performance does not depend on our work alone: it also depends on the (ir)rationality of other market players i.e. the market which creates both volatility and opportunity.