How We Invest
We act like a business owner, determining when to take risk and when to preserve capital. Above average gains in good times are not proof of a manager’s skill; it takes superior performance over an entire cycle to prove that increases were earned through acumen, rather than by taking additional risk.
We start by looking at what a business could be capable of in a “normal” environment, focusing on these critical steps:
- We look for inefficiencies in the market. We invest in less efficient markets where professional application of skill and effort will pay off for our clients.
- We take positions contrary to conventional wisdom. We seek out the evidence needed to give us the comfort that our point of view is correct.
- We always do our homework. Excellent performance can only be achieved through deep knowledge of companies. Our investment process is entirely bottom-up. Due diligence starts with what you know – the resources and people, the environment, and the nature of the change to develop the likely consequences of those developments.
- We have a forward looking approach. We invest in businesses we understand that have a high probability of increasing in price for reasons not related to the movement of share prices in general, but related company specific developments. Traditional value investors search for opportunities statistically, looking at past items and having a backward looking approach. You do not drive a car by looking in the rear view mirror; you do not invest that way either.
- Investing is about the long-term. According to McKinsey & Company, the average holding period for an investment manager today is 10 months. Kingwest’s average holding period is 4 years. This patient approach allows us to take advantage of opportunities that short-term focused investors overlook.
- Above all, we avert risk with informed common sense.
Our track record over the long term demonstrates the validity of our investment approach.