Investment Principles
1
We see our holdings in equity stocks as partial ownership of real businesses — and therefore expect the long-term performance of our portfolio to follow that of its underlying businesses. We do not own pieces of paper for speculative purposes. When we buy a stock, we are buying a share of a business.
2
We are value-based investors at heart. We will buy stocks that are selling below their intrinsic value, allowing for an appropriate margin of safety. Price and value are not the same thing — and the gap between them is where opportunity lives. We are content to wait, sometimes for extended periods, for that gap to appear.
3
Our circle of competence is limited — and we are honest about that fact. We invest only in opportunities we can genuinely understand and reliably forecast. We are not looking for complexity or cleverness. We are looking for clarity. We seek businesses where the investment case is simple enough to be stated in a few sentences — what we think of as a "one-foot hurdle."
4
We have a strong bias for businesses that deliver attractive returns on equity while employing conservative leverage. A business that earns high returns on capital without needing to borrow heavily to do so is a fundamentally different animal from one that relies on debt to amplify returns. We prefer the former — always.
5
We seek to associate with management teams who exhibit personal integrity and possess the appropriate skills and mindset to allocate capital wisely on behalf of shareholders. A great business in the wrong hands is not a great investment. We pay close attention to how management behaves when times are difficult, not just when things are going well.
6
We think patience — and the ability to simply do nothing — is one of the most critical and least practised skills in investing. Aldra Holdings will likely experience long periods of inactivity. We consider this a feature, not a flaw. The ability to sit still while others act is, over time, a significant source of competitive advantage. Activity is not the same as progress.
7
We do not expect significant portfolio churn. When we buy a business, our intention is to hold it for as long as the investment case remains intact. We will consider selling when the opportunity cost of holding becomes too high, or when our appraisal of intrinsic value relative to the selling price makes it clearly advantageous to do so. Selling for any other reason is, more often than not, a mistake.
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If our principles resonate with how you think about investing, we would be glad to hear from you. Aldra Holdings operates on a selective basis.