The combination of a superior business model and an astute, entrepreneurial and well-incentivised management team frequently maximises the future cash flows of a business. If acquired at a reasonable price, owning such businesses provides the prospect of generating above average investment returns. We also understand the importance of genuine earnings momentum within a business. Our competitive advantage as investment managers is our ability to better understand the fundamental drivers of superior and inferior business models and to distinguish between exceptional, capable and poor management teams. Deeper insight into these factors allows us to invest with conviction over long periods of time in great businesses, and to avoid or short sell those inferior peers.
We recognise that investment managers do not deal in certainties – “facts” are often disproved, information changes and we make errors in our assessments. We cautiously guard against biases, which can hinder incorporating the dynamic environment within which we operate. We continually evaluate new information and are flexible enough to recognize when an investment thesis is no longer valid.