Our competitive advantage is based on our proprietary quantitative process which has a proven ability to identify a structurally advantaged subset of the universe. Fundamental research is used to eliminate from this subset the companies that we believe have qualitative problems that our systematic process does not capture.
Companies we own generate sufficient cash flow to maintain their assets, internally finance their growth and return unused capital to shareholders, either directly though the payment of dividends or indirectly through share buybacks or debt repayments. We avoid debt laden companies, cash hoarders (a poor use of capital) and externally financed serial acquirers. Importantly, we ensure style discipline by only purchasing companies with cheap valuations using a blend of standard valuation metrics.