Portfolio management appears to be locked between two strategies:

  • Active portfolio: Varied approaches. Portfolio diverge from benchmark allocation with the aim of adding value.
  • Index investing: Passive buy and hold approach (broadly diversified portfolio designed to mimic the behavior of a specific benchmark index).

Focus investing is the antitethis of a broadly diversified, high-turnover approach:

  • Choose a few companies with above average returns in the past and with a high probability of continuing that trend
  • Make your investments by placing the highest percentage weightings on the highest-probability events
  • As long as nothing deteriorates leave the portfolio largely intact over the long term
  • Be patient, time will tell you if you were right or wrong, nobody else can

Focus investing pursues above-average results

Focus investing process is based on the intrinsic value of a company which is determined by 3 factors:

Quality of Business

Competitive Positioning,
Pricing Power,
Profitability,
Growth, Strategy

Quality of Financials

Strong Balance Sheet,
Free Cash Flow Generation,
Return On Capital

Quality of Management

Good Cash Allocator,
Owner Oriented,
Experience and Strong Track Record