Quality. Our approach to investing is simple: investors are best served by owning a portfolio of competitively advantaged businesses that have ample reinvestment opportunities, the ability to sustain profitability over a long period of time, and managed by wonderful operators. Each stock in our portfolios represents a business, and we look to partner with companies that will achieve superior long-term returns by fending off competitors and sustaining exceptional business performance. We concentrate client capital into a focused portfolio of 15-25 wonderful businesses that we aim to own for a long time period.
Businesslike.We are business analysts, not market timers or forecasters of the future. We analyze the fundamental nature of businesses to determine how they make money, what customer base they serve, and the dynamics of the industry in which they compete. We believe the best way to earn consistent returns from the market is by investing in strong businesses and purchasing ownership shares in those businesses at discounts to a conservatively-estimated intrinsic per share business value. Once we purchase stock, we consider ourselves business owners, and we let underlying business performance dictate our ownership period. We do not trade in and out of stocks, and we do not attempt to time the market. We purchase our ownership interests with a minimum outlook of three to five years, as even the most proficiently run businesses can struggle in a given year.
Proven. Our investment style is our own unique spin on a tried and true investment approach championed by the greatest investors of all-time. We believe this approach is proven to offer long-term outperformance while minimizing the potential for permanent capital loss, or what we define as risk. While speculative fads and approaches come and go, we believe investing with an owner's mindset in competitively advantaged businesses generating cash returns on invested capital purchased at reasonable discounts to intrinsic business value is the greatest way to earn superior long-term returns from investment operations.
Focused research. Warren Buffett coined the term "economic moat" for the durable and structural competitive advantages enjoyed by businesses that are able to earn consistently high returns on invested capital while remaining protected from the threats of competition brought on by the fundamentals of capitalism. The hallmark of our investment process is in-depth fundamental research of primary source materials allowing us to uncover those exceptional businesses that enjoy strong competitive advantages and generate cash earnings at a higher rate than the average business. We search for the small number of businesses that are able to enjoy the fruits of their economic moats and we drill down deep into all facets of the business in order to ensure that we understand the investment opportunity as best as we can. Companies that consistently earn high returns on invested capital and generate significant amounts of free cash flow over long periods of time are ripe for our investment. If we can understand the fundamental nature of those businesses based on our in-depth research, we have the potential for a long-term winning investment.
Margin of safety. While we are loathe to pigeonhole our unique investment perspectives into a specific camp, we do consider ourselves to be value-oriented investors. What we mean by this is we strive to estimate a range for the true intrinsic per share business value of each business we study. We believe businesses have a market value and an intrinsic value, and that these values often are different. Our assessment of intrinsic value is the total amount of cash we believe can be taken out of the business over its lifetime. We look to pay a lower price for our ownership interests in fundamentally sound, strong businesses than what we believe those shares are worth intrinsically. We always take valuation into consideration prior to buying shares of stock, and we commit ourselves to paying no more than a fair price relative to our conservative estimates of intrinsic value. Over time, this allows us to incorporate the most important concept in investing, margin of safety, into our process.
JRW Financial LLC | 162 South Easton Road Glenside, PA 19038 | 267-217-3025 | www.jrwfinancial.com