All investments at Mpartners adhere to the principles of sustainable value. Our sustainable value philosophy is a combination of the tried and tested value approach together with a focus on sustainability.
We adhere to an evolved version of the basic principles laid down by Benjamin Graham – which were also used so successfully by legendary investors Warren Buffet and Charlie Munger in Berkshire Hathaway.
1. WE INVEST FOR THE LONG TERM
A long-term time horizon is probably the single greatest competitive advantage that an investor can have and yet so few are able to exploit it.
WHY? – Most renumeration is short-term bonus oriented leading to short-term quick buck decisions. We are students of the legendary investors of Berkshire Hathaway
Charlie Munger – ‘show me the incentive and I will show you the outcome’
Warren Buffet – ‘Our stay-put behaviour reflects our view that the stock market serves as a relocation center at which money is moved from the active to the patient’
We search for businesses that earn superior returns and are able to sustain them over a long period of time. We must be patient if we wish to buy these business at a reasonable valuation.
2. WE FOCUS ON AVOIDING PERMANENT LOSS OF CAPITAL NOT REDUCING VOLATILITY
This fact makes it important to do careful company due diligence covering:
- Sustainability of the business model
- Strength of balance sheet
- Resilience of cash flow generation
- Valuation that has ample margin of safety
3. VALUE IS THE MOST IMPORTANT RISK CONTROL
We look to make good long term returns for our clients, however, capital protection is paramount. This requires controlling risk in an uncertain world where most things cannot be controlled, but..
We are very focussed on the one risk over which we have 100% control – the price we pay for an investment. Our core investment philosophy is consciously based on the premise that the riskiest thing is overpaying for an asset (regardless of its quality), and the best way to reduce risk is by paying a price that is low. A low price provides a margin of safety and that is what risk-controlled investing is all about.
To quote Benjamin Graham, the mentor of Warren Buffet: ‘The function of the margin of safety is, in essence, that of rendering unnecessary an accurate estimate of the future.’
As long-term investors we have always integrated our companies’ environmental, social, and corporate governance policies into our analysis.
Taking things a step further we also offer an impact value portfolio which seeks companies whose products and/or services generate a measurable positive social and/or environmental impact.
In both cases our approach is an active, positive one. This is entirely different from passive investing or exclusion.
1. A LONG TERM VIEW REQUIRES A SUSTAINABLE APPROACH
As long-term investors we require our companies to have a holistic approach to all stakeholders, not just shareholders. This includes employees, customers and community. We also recognize that we currently live in an imperfect world. Our responsibility as investors is to support those companies moving in the right direction. A focus on exclusion only can never be a long term solution.
2. WE DO NOT INVEST IN SUSTAINABLE COMPANIES AT ANY PRICE
In our opinion investors buying into the popular sustainability trend with no regard for price, are no better than those investors who buy stocks for profit with no regard to any negative impact. Sustainable value investing consciously takes the whole picture into consideration, therefore avoiding the financial distress caused by all investment bubbles.