Successful business owners and executive managers look beyond the next quarter, taking a long-term perspective on maximizing the value in their business and enhancing the sustainability of their business model and market position. This belief is at the core of our “Invest as Owners” process.  

The process begins with a focus on up to six hundred of the largest companies as measured by market capitalization. We conduct a detailed quantitative analysis to assess each companies past excellence and to identify those organizations with exceptionally high profitability. Candidate firms are then qualitatively screened to their prospects for future excellence. During this portion of our review, we evaluate a company’s business model by comparing them to Porter’s “Five Forces of Competitive Advantage:” 

1. Barriers to entry
2. Threat of substitutes
3. Buying power
4. Supplier power
5. Degree of internal rivalry

Developed by Michael Porter of the Harvard Business School in 1979, this framework draws upon industrial organization economics to determine the competitive intensity and therefore the overall profitability of a market. Once we complete this stage of our review, approximately ten-percent of the companies analyzed meet our criteria as prospective investment candidates. For these sixty or so companies, our Chief Investment Officer and Team of Advisory Managers analyze the candidates to determine which companies are trading at steep discounts relative to their intrinsic value based upon their historical and relative growth rates, conservative consensus estimates and compressed value multiples.

In the end, our “Invest as Owners” process yields eighteen to twenty-four growth companies that we can hold in our client portfolios for the long-term.