CAPITAL MANAGEMENT LTD.
Deep Research -> Insights -> Conviction
We draw inspiration from the teachings of Warren Buffett and Charlie Munger. We believe that intellectual honesty, creativity, and a lack of 'biases' are required for good stock picking along with rigorous analysis.
We believe in investing by thoroughly studying business fundamentals. We study the businesses history, business model, financials, culture and management incentives
While these businesses can be popularly classified as growth or value our yardstick will be that the discounted total sum of cash flow we expect to get in perpetuity from the business should be more than price paid. We believe in a margin of safety.
We think of stocks not as symbols on a screen but as owning part ownership stakes in a business
We do not see volatility or temporary declines in share price as a risk but as an opportunity to accumulate more of the businesses we like for better valuations. Risk to us is permanent impairment in value of the investment. Due to this, we will always focus more on downside risks than on upside potential.
Our portfolio construction approach is similar to that of building a sports team with both offensive and defensive capabilities. We will have between 15-25 positions at any one time. Our philosophy is to be diversified enough to survive but concentrated enough to matter. The portfolio will contain three principal components:
Compounders - Compounders are good quality companies with a runway for growth run by competent management teams . They typically have intangible assets or market positions that are difficult to replicate due to which they earn a high rate of return on capital
Special Situations - We can opportunistically buy businesses that are cyclical or businesses that are facing temporary problems with the condition that we are able to buy these businesses at a deep discount to their intrinsic value.
Hedges - Bonds, cash, gold and selective ETFs can act as effective hedges in times of uncertainty. We monitor macro fundamentals, technicals, flows, sentiment, and positioning. These hedges will be cautiously and tactically deployed to protect partners against large drawdowns.