How We Think

Margin of Safety

We are actively looking for more investments that meet our qualitative criteria of good businesses with a sustainable competitive advantage and with talented, honest management.  If these qualitative criteria were our only concern, we would have dozens of qualifying investment ideas.  However, price is essential to our process.  We buy companies that pass our qualitative tests when we can purchase them for roughly half of our conservative appraisal of their intrinsic values.  This “margin of safety” between a company’s real value and its currently quoted market price will serve to protect us when we make a mistake and to generate outsized returns when we are correct.  “Margin of safety” is the cornerstone of our investment approach.  While the financial press is praising the recent advances in the market, we are disappointed.  Rises in the general market level decrease the investment opportunities that fit our criteria.  We are still looking vigorously through ideas in hopes of finding a few that we can add to our stable of excellent businesses.