Take advantage of market inefficiencies from time to time
We have a ‘Contrarian’ approach and bad news might be good news for us. The market at times over reacts to a ‘bad news’.
For instance, a company might have had a bad quarter, gone through restructuring, or recently announced a spin-off; the market might be too pessimistic about these scenarios. This might lead to a low valuation for an otherwise excellent business, which we believe would be the right time for us to invest in the business.
For instance, during the 2008 financial meltdown, many exceptional businesses were available at a very cheap discount. Political changes and natural disasters tend to have a similar effect, when markets can overreact and great businesses are available at bargain prices. We are always looking for opportunities to gain value by investing in such businesses.
Focus on small and midcaps
Companies with market capitalizations of less than $10 billion have a higher probability of being neglected, or escaping the radar of large mutual funds.
These companies are more likely to be unattractive for large funds and are therefore more likely to be priced below their intrinsic value.
Invest in American Companies
The United States economy is the largest in the world, and the country has the highest GDP globally (approximately a fifth of global GDP). The US is home to 29.6 million small businesses, 30% of the world's millionaires, 40% of the world's billionaires, as well as 139 of the world's 500 largest companies.
The market capitalization of the US is about $15 trillion with over 5,000 companies to choose from. As an added advantage, the US market is very well regulated and accurate information on companies is available quite easily. Reliable and timely availability of financial data is key for thorough analysis and therefore, the US is our preferred market for investing.