In-depth analysis
Long-term perspective
Bespoke portfolios
A disciplined approach
Global
In an increasingly complex and interconnected world, the best investment opportunities can come from anywhere. Our investing perspective is informed by global macro-economic factors and we seek to invest in businesses that take a similar approach in their operations. We view global business models as attractive from a growth perspective, but also as an important diversification tool.
Long-term
Time is the friend of the great business. We seek great businesses with abundant reinvestment opportunities that are run by exceptional people. While in the near-term markets can be volatile, over the long run these businesses can compound shareholder capital at attractive, above average rates. This is also an inherently tax efficient strategy by virtue of allowing capital to compound for longer periods of time without the drag of taxes.
Focused
Great businesses trading at attractive prices are rare. When we identify a company that we believe can compound capital at above average rates for a significant period of time, we will take a meaningful position. We believe that a portfolio comprising our best ideas will lead to both better returns and reduced risk of loss over the long-term.
Innovative
Businesses that focus on innovation as a core piece of their identity are more likely to take market share, fend off competitors and discourage new entrants. Investing wisely in innovation (whether that be technological innovation, a unique business model, or new products that will delight customers) can be a very high return use of capital. We seek to own businesses that view that activity as a central component of their competitive advantage.
A nuanced view on value:
There is more to a good value than just a low price. When evaluating potential investments, we are aware that a low valuation alone does not necessarily make for a terrific long-term investment.
Growth matters
Durable sales growth is the top of the funnel for shareholder returns. Businesses with ample organic growth opportunities and pricing power are in better position to weather various market environments and produce above average profitability growth when paired with sensible capital allocation decisions by management.
Returns matter
Intelligent allocation of shareholder capital is the engine that drives future cash flow growth and further compounding. Businesses need to have ample reinvestment opportunities at rates of return in excess of their cost of capital to be viable long-term holdings.
Price matters
Growing businesses with great capital allocation opportunities can still be poor investments if purchased at a price that overcompensates for the attractive attributes. We seek to purchase these great businesses with a margin of safety to our view of what the company is worth.
Risk aware, not risk adverse:
We seek to protect client assets from uncompensated risk through proper asset allocation and rigorous security selection.
Near-term price volatility
The most commonly discussed type of investment risk is associated with fluctuations in market prices. Transitory moves in market prices are common. However, as the chart to the right shows, the probability of a positive annualized return is greatly increased by lengthening the holding period.
By understanding our clients’ cash flow needs we can design an asset allocation and income target that help reduce the risk of being forced to sell in a weak market, allowing equity investments to stay invested through a market cycle.
Returns inclusive of dividends. Data spanning 75 years (3/31/1946 through 3/31/2021)
Source: Robert Shiller Stock Market Data, Ipswich Investment Management
Permanent impairment of capital
While near-term market price moves can be stressful and require a long-term perspective to successfully navigate, the permanent impairment of capital cannot be reversed through patience. As a result, we spend the majority of our time assessing business quality, growth prospects, market dynamics, credit worthiness, and valuation to minimize the likelihood of a permanent impairment of client capital. There is no substitute, in our opinion, for deep fundamental research to guard against this risk.
Loss of purchasing power
Although investing in cash and Treasury securities can provide investors with a stable portfolio, it does not protect against inflation, which even at low levels erodes the value of a portfolio over time. Owning a portfolio of well-managed businesses with strong pricing power is an excellent protection for investors, who stand to benefit from growth in cash flow that is greater than inflation.
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