We use various financial criteria to filter the universe of potential companies to those that are worthy of more extensive research.
High Return on Capital – We want to own businesses that earn above-average returns on capital over an economic cycle.
Excess Cash Flow – We search for businesses that generate “free” cash beyond maintenance capital spending needs. We want businesses that do not require all their earnings to be reinvested simply to remain in place.
Balance Sheet Strength – Financial strength provides companies the ability to weather unexpected shocks and greater flexibility to pursue value creating opportunities.
History of Success – We look for businesses that have achieved consistent growth in intrinsic value and have strengthened their relative market position over time.