In the long run the return on a stock will closely approximate the return on the business itself - Charlie Munger
Companies, whether public or private, should be managed in the best interest of their shareholders. Consistent with this view, we invest for the long term in well-run companies creating sustainable value. As Charlie Munger says, if the business increases in value, its stock price will follow.
We focus on companies that are out of favour, complex or undergoing significant change. Such companies are the most likely to be mispriced, thereby mitigating risk. We originate our own research and continually engage with management to develop in-depth knowledge of key differentiators — strong leadership, large market opportunity, barriers to entry — that drive winning companies.
We assess business value by the company’s ability to optimize cash flows from existing assets and earn attractive returns on incremental investments. We assess valuation risk by constantly weighing price against value. We assess financial risk by balance sheet strength. Experience has taught us that investing in companies with these characteristics stacks the risk/reward deck in our favour.
We avoid companies doing harm. Opportunities where environmental, social, and governance trends drive improving economics are sought out. Kingwest signed the UN Principles for Responsible Investing in 2017.
We emphasize mid to large size companies with resilient business models and commonly maintain investments for 5+ years. Our portfolios are concentrated, driven by conviction, and differ markedly from market indices. We do not dilute our best ideas by over-diversifying.
We don’t make forecasts of the economy or markets. For information to be valuable, it must be both important and knowable. Knowing what will happen in the future is clearly important, but the future is unpredictable. It is not that macro economic factors don’t matter, rather they are too hard to consistently and accurately predict. Therefore, they’re of little help in achieving investing success.
We don’t wish for success, we plan for it. Sustainable business value. Proven, capable leadership. Price matters. This time-tested strategy will continue to drive better returns with less risk, making Kingwest a secure home for your assets.
