Investment Process (PSQGX)
Proprietary Quantitative Analysis & Screening
Start with Standard & Poor’s database of 10,000 company database and identify companies with the following 4 criteria:
- Financially sound
- High quality owner earnings
- Persistent profitability and high profit margins
- At least $1 of market value per $1 of retained earnings
Qualitative Analysis
The 150-200 companies remain and are studied to identify sustainable competitive advantages
Portfolio Construction
Result is 50-100 candidates for PSQGX portfolio of 24-45 names. Initiation of a position is approached when prices are suppressed.
The difference between our estimate of a business’ intrinsic value and its market price.
Sell Discipline
Business Risk
- Deteriorating fundamentals of the business
- Competitive developments or secular shift in economics of the business model or industry as a whole
- Acquisitions outside of company’s core competency that put margins at risk or defocus the company
- Regulatory changes or management changes
Valuation Risk
- Price run-up in excess of intrinsic value
- Secular shift in economics, e.g. declining margins and greater competition that affect long term value of the investment
- Position trimmed when it approaches 4% -6% of total portfolio