Confirm that the business has a durable, competitive advantage over its competitors
Confirm the business is run by competent, honest, shareholder-oriented management
Perform in-depth financial analysis
Patiently wait to purchase at a time when the business is “on sale” providing a comfortable “margin of safety”.
This strategy, over time, will help to generate higher than average risk-adjusted returns over other investment strategies.
WE SEEK TO UNDERSTAND
THE MOOD OF THE MARKET
The stock market is made up of people. People are emotional. So, the stock market is emotional, primarily driven by fear, and greed. As Warren Buffett has also said, “You want to buy when everyone else is fearful and sell when everyone else is greedy."
Ben Graham considered the grandfather of Value investing, and Warren Buffett's mentor, dubbed the stock market , “Mr. Market, who is manic depressive. He will gladly sell you stock when it to priced too low and buy stock from you when it’s priced too high."
The trick is to know what mood he is in.
FOCUS AND FORTITUDE
At Northcott Capital we recognizes that a single stock represents an interest in a real company. This enables us to focus our time and attention on a company’s fundamentals, evaluate the business by assessing its operating cash flow, capital expenditures, tax provisions, competitive threats, future opportunities, competitive barriers to entry, and many other financial considerations. Price trends, volatility, and performance relative to other stocks or the stock market as a whole, is not our main concern.
Northcott Capital Management strives to:
Identify a company’s true fair market, intrinsic value
Forecast its future growth potential
Focus on purchasing the stock if or when it falls within our predetermined “Margin of Safety” purchase price
Understand that the stock price will eventually, in time reflect the true intrinsic value of the underlying business
Peter Lynch, one of the most successful fund managers at Fidelity is famous for saying, “You need to know what you own and why you own it”. We recognize this. When we purchase a stock, we are investing in a business, not a speculative gamble on a piece of paper, but rather a percentage ownership of an actual business.
Our primary goals are capital preservation during market downturns and finding deep value with a contrarian bias. We use event driven volatility and technical momentum indicators to invest in high-quality, well-run companies and at a price below intrinsic / fair market value insuring a clear margin of safety purchase price.
To provide a trustworthy, reliable investment vehicle for smaller investors with limited capital or amounts much lower than traditional investment management firms would consider.
Northcott Capital offers the comfort of knowing our personal capital is invested alongside our partners with an “in this together”, investment club approach. We achieve this objective by investing in the same companies, and in the same amounts as our partners. This ensures our undivided attention to detail because our own personal financial interests are also at stake. Our pooled funds approach enables us to harness greater investment opportunities through the deployment of time-tested, proprietary investment strategies.
Long term view, but tactically traded investments
Focused portfolio, but often hedged
Easy to understand, high quality businesses
Durable Intrinsic protection against competition
Management with integrity and talent
Strong balance sheets
Low to no debt
Companies that do not need access to outside capital to survive and economic storm
Event driven, miss priced equities
The majority of the invested capital will be in a small number of equity positions, typically 15 or less.
Northcott Capital will seek to purchase equities at half the intrinsic value, based on a proprietary valuation methodology, with the expectation of long-term capital gains.
When proprietary technical indicators signal a major market direction shift, we will adjust the portfolio asset allocation between overweight equities to overweight cash.
We employ derivative option strategies to create cash flow, provide cost basis reduction and creating advantageous entry and exit positions.