The model portfolio, which forms the basis for client portfolios, is constructed one company at a time and contains up to 35 companies. Individual position sizes are limited to 8% at market. Sector weightings, weighted-average market capitalization and portfolio turnover are largely a result of decisions made with respect to individual stock selection. However, we have a long-term orientation and therefore expect relatively low turnover. Finally, we are not market timers, choosing to be fully invested at all times.
We seek long-term capital appreciation for clients by investing in high quality growth companies. We perform ongoing, proprietary, bottom-up research on each company owned or under consideration. Companies we find attractive will likely possess some or all of the following qualities:
Have the prospect of strong cash flow per share growth with duration
Compete in business spaces with substantial market opportunities that are benefitting from secular trends
Possess competitive advantages and/or barriers to entry
Employ managers with vision and operating skills who are focused on creating shareholder value
"Keep Ithaka always in your mind.
Arriving there is what you are destined for.
But do not hurry the journey at all.
Better if it lasts for years,
So you are old by the time you reach the island,
Wealthy with all you have gained on the way."
- Ithaka, C.P. Cavafy
We will eliminate a holding from client portfolios when we decide the holding is no longer likely to add value. Reasons may include, but are not limited to, the following:
We anticipate the company’s growth will slow more rapidly than the market’s expectations
Competitive advantages appear likely to wane and/or barriers to entry appear likely to deteriorate
There is a change in the business, such as a merger, a major acquisition, or a change in management that fundamentally alters our original investment case
No value has been realized within a certain time period, implying our initial thesis was wrong