Quality at a Reasonable Price

The investment synergy of knowing what you own and why.

By Wendy K. Bennis & Charlie Mahar

Quality: a Foundational Investment Philosophy

We believe in investing in exceptional businesses and making long duration commitments to companies that demonstrate qualitative advantages.

Our Quality at a Reasonable Price approach focuses on sustainable competitive advantages and valuation discipline in the cause of investing for both reward and risk management. As strategic business investors driven to create value for long duration investors, we believe in selecting investments based on the advantages created by a given company’s superior fundamentals. We know the businesses we own.

This discipline is applied across all Tealwood’s portfolios and their equity classes, and is foundational to the performance objective of providing value-added results via better risk management over the economic cycle.

Independent Research + Critical Thinking + Experience

Although there can be many factors to consider when selecting an investment. Here we summarize examples of these elements in terms of qualitative and quantitative criteria.

  • Quantitative criteria include margins, balance sheets, earnings growth, free cash flow generation, and return on capital. The reasonable price criteria include price-to-earnings growth ratios and discounted pricing is as compared to a conservative estimate of fair business value.
  • Qualitative criteria emphasize the combined associations of quantitative criteria with, for instance, business model advantages. Examples would be recurring business, unique intellectual property, and pricing power. It is also important to understand category and industry tailwinds and/or trending growth opportunities, competitors and competitive advantages, as well a company’s management team.

Understanding quantitative and qualitative criteria in identifying companies with sustainable competitive advantages can be a significant factor in providing enhanced risk management.

Summary

We believe better businesses make for better long duration investing. Independent research, a rigorous screening process, and a thorough valuation analysis all contribute to having confidence and conviction around the investments you own and why.