Philosophy

I am a value investor specializing in publicly listed equities, focusing on businesses with sustainable free cash flows that trade at discounted prices.

While I aspire to emulate the investing philosophy of Warren Buffett, I recognize my limitations in identifying “wonderful companies at fair prices.” Instead, my strategy gravitates towards finding “fair businesses at wonderful prices.” I augment this approach with qualitative investment criteria, aiming to tilt the odds in favor of nurturing these businesses into “wonderful” entities over time. I prioritize risk management and avoid relying solely on outlier scenarios for returns, preferring to seek out opportunities with favorable risk-reward profiles.

My investment strategy involves targeting companies offering near-term free cash flow yields that exceed my minimum threshold of 10%, thereby mitigating the need for the market to immediately recognize their intrinsic value for me to achieve satisfactory returns.

Given that attractively priced quality companies are often scarce, I focus on exploring less mainstream opportunities, particularly smaller companies in sectors or regions facing temporary challenges that are overlooked by most investors.

While I regularly employ a Discounted Cash Flow Model (DCF) for business valuation, I’ve developed a simplified variation of the DCF to reduce the complexity and potential for misinterpretation. I value practicality over precision, as encapsulated in the quote by Sir Maynard Keynes:

It is better to be roughly right than precisely wrong.

Sir Maynard Keynes

Lastly, to safeguard against errors in judgment, I always insist on maintaining a margin of safety in my investments.

Investing Checklist

To ensure a consistent investment process, I adhere to the Contrarian Cashflows checklist. For a company to meet my investment criteria, it must satisfy all the points outlined below. If a company in my portfolio no longer fulfills one or more of these criteria, I assess whether the issue is temporary. If not, I exit the position.

• Business
  1. The business is self-funding its operations.
  2. The business earns high returns on capital.
  3. The company maintains control over its destiny.
  4. The business can sustain its competitive advantage.
• Market
  1. The market is not in secular decline.
  2. The market supports product or service differentiation.
• Management
  1. Management is aligned with shareholders.
  2. Management has a proven track record.
  3. Management exhibits high levels of integrity.
• Financials
  1. The company does not rely on debt as a permanent funding source.
  2. The company consistently generates positive cashflows.
  3. Excess cash is returned to shareholders.
• Valuation
  1. The company offers a minimum 10% free cashflow yield, OR
  2. Within a 3-year-timeframe, the investment yields a minimum 15% free cashflow yield.