Principles
- We invest in mature and well established businesses, with predictable future free cash flows and a large degree of customer dependency. We invest in equity, debt and sparingly also in or through derivative instruments.
- Intrinsic value ("IV") is the discounted value of the cash that can be taken out of a business during its remaining life time. It is the basis of our investment decisions and serves as a measure of the relative attractiveness of the market value of a business or its debt. The calculation of IV takes into account several factors and future projections and will always be rather a process of estimation. It must be adapted when cash flow forecasts, asset values, tax rates, business fundamentals or interest rates change. We will not report IV or make our calculations and estimations public.
- Our investment horizon is of a long-term nature, with well defined entry points and very few, rather opportunistic divestments.
- Price and availability of investment opportunities define the pace of our investments – during times of booming markets we may not engage in new investments over considerably long periods of time.
- We may engage in "post stress" situations and invest into companies or their financial instruments after a major negative corporate event has occurred and has been "digested".
- We may engage in pre-IPO situations.
- We do NOT invest in startups or early stage companies. We generally avoid investments into hyped/overhyped companies (e.g., biotech).
- When markets go down, we view it rather as an opportunity than a negative event. We establish a certain "portfolio on radar screen" with pre-defined IV versus market price entry levels and take position sizes in relation to the valuation opportunity (the lower the bigger).
- We are careful with leverage and use it rather as an exception than a regular way to increase or secure the value of our holdings.
Measure of Performance
- We report our per share book value on a regular basis. Book value and IV may not correspond. In opposite over time they might be very different.
- Our long-term goal is to maximize IV on a per share basis and we will internally measure our performance by the periodical per share gain in IV.
- We would like to see our IV per share development outperforming the major indexes of international equity markets on a long term view.
Operating Model
- We do not operate like a hedge fund and we do not charge fees. We only bear the expenses of our ongoing investment research, administrative costs and compensation for management and personnel. By nature of being a corporation, we cannot be faced with redemptions.
- We operate this company with the spirit of a partnership – rather than of a corporation.
- Our sources of non-interest bearing capital will be equity, tax credits and "float" – in case we will be able to control insurance type of businesses in the future.
- To the owners of our common stock we might not pay dividends – we may issue preferred stock that could offer preferential dividends, but may be limited or restricted from voting at our AGMs.
- We may also offer other forms of participation in capital and risks.
- We like our directors to own a substantial portion of stock – "we eat what we cook".
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