-Preservation of real capital. Although investing money and risk are always connected, we seek to minimize risk and preserve your real (adjusted for inflation) purchasing power first and foremost. We seek investments in companies with strong business franchises, low debt, and good long-term prospects. We believe these types of companies are lower risk in general. We typically avoid companies that maintain complicated balance sheets, and prefer firms with long track records and growing dividends.
-Avoidance of high fees and taxes. Transaction costs, portfolio management costs, and taxes are the enemies of savers and investors. We aim to keep your costs low, thereby increasing your net returns. Frankly, we believe investors should be outraged by high costs for investing, and should take action to minimize their investment costs.
-Seeking strong corporate stewardship. We attempt to invest in companies that practice fair labor policies including executive compensation, straightforward accounting, and environmental and political responsibility. Adhering to the principles of liberty, we will not invest in companies that we believe violate our core values.
-Seeking hard to replace assets & durable business models. There is always something hot and enticing to invest in, but we would rather invest in companies with more predictable future. Some consider this style boring, but we consider it safer.
-Avoidance of margin. While it is possible to enhance returns with borrowed money, we do not believe investing on margin is a good idea as a general rule. Margin investing is likely most successful during times of investor panic, when investments can be made for very low prices, but these opportunities do not arise often. Even then, we do not go on margin. Ever.
-Understanding the difference between market risk and business risk. The stock market has a history of price volatility, which is a fancy way of saying stock prices change frequently. However, business prospects, for companies that have compelling products and services, are not as volatile. Our goal is to invest in these compelling companies when the market offers us the opportunity to buy at good prices. We believe this is the best way to mitigate the investor’s risk over time.