WORKING WITH US
Our Philosophy & Principles
At L.R.L. Capital, we hew to a long-term value philosophy, a disciplined approach, and a sound framework that is backed by our proprietary valuation models, each of which have proven, in conjunction, to substantially enhance the probability of achieving above-average returns over the long term.
A LONG-TERM VALUE PHILOSOPHY
is our cornerstone, with an emphasis on features such as margin of safety and fundamentally unjustified multiples, as well as value “plays” occasionally embedded in growth enterprises.
OUR DISCIPLINED APPROACH DEMANDS:
- a concentrated portfolio, in recognition that good investment ideas are few and far between; thus, our concentrated portfolio keeps us immunized from the epidemic that has infected so many larger, kitchen-sink-approach firms…that is, too many dollars chasing too few good investments (it is a direct result of this epidemic that the return-performance of most large money managers suffer); and
- that price determines one’s return and is, therefore, a critical element of any investment decision. We avoid overpriced assets even when the company, otherwise, appears promising.
IN THE FUNDAMENTAL EQUITY OF PAY-FOR-PERFORMANCE
which, along with personal financial stakes, keeps our interests aligned with that of our clients. Simply put, if our portfolio fails to generate a positive return for our clients—the firm does not receive a performance fee (see Hurdle Rate).
FURTHERMORE, A HURDLE RATE EQUIVALENT TO THE HISTORICAL
average market-return is most appropriate, and a performance fee is earned only when this rate is exceeded.
“In the absence of a set of practical, guiding principles, our investment philosophy would be akin to a toothless law, which is meaningless without consistent enforcement. Experience has taught us the importance of establishing and adhering to a sound set of principles, principles that have guided us on our mission. Below is an excerpt of our Investment Policy Statement (IPS) illustrating a number of those principles.”
Excerpt from L.R.L. Capital’s Investment Policy Statement
2.1 Never invest, in whole or in part, in a proposition that fails to inspire a deep sense of understanding and simplicity.
2.2 Quantitative factors will easily lend themselves to analysis; it is the qualitative factors that can “make or break” an entity particularly and, therefore, should be plumbed in a manner that is thoroughgoing and deliberate.
2.3 “It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price”.
2.4 Identify first-class businesses, first, accompanied by first-class management. “Good jockeys do well on good horses, but not on broken down nags.”
2.5 Remain guided by rationality and honesty, the highest virtues.
2.6 Smart, deliberate concentration is far better than mindless diversification.
2.7 Provided an investment continues to perform, the ideal holding period is forever.
2.8 Be forever mindful of the “magic” of compounding.