Investment Philosophy

We seek to invest in excellence. But excellence is often not readily apparent. Identifying excellence in a company is made difficult by its subjective, uneven and sometimes ephemeral quality. Quantitative indicators of excellence (mainly financial metrics) are readily available to all money managers and are routinely employed by them. Such factors by themselves, however, are insufficient for identifying outstanding companies. Years of observation and research supplemented by direct experience in starting, acquiring and managing companies in a variety of industries have taught us to pay close attention to a constellation of qualitative aspects as determinants of excellence. Among these intangible factors are:

• Ethical and conscientious corporate governance. Outstanding companies have in common leadership that manages by strongly held principles. It is not enough for management to be competent and experienced, important as those qualities are. We believe integrity is good for business.

• Top notch people. Another hallmark of excellent companies is an enduring tradition of recruiting talented employees, then training, motivating, and appropriately rewarding them to drive the company’s success.

• Unwavering devotion to serving the company’s customers. Companies of excellence recognize that satisfying the needs of customers is a prerequisite to serving the interests of shareholders, employees, and other constituents. Elementary as this may seem, there are precious few companies whose dedication to identifying and meeting customer needs is paramount in their decision making.

• Endurance. Truly great companies demonstrate the ability to endure and even prosper through many different periods and through cycles that adversely affect their products and markets. Such resilience is indicative of a franchise that is well-protected from serious competition. For that reason, a considerable segment of every UAS portfolio is invested in companies whose roots date back decades, a century, or more.

Identifying an excellent company is only half the investment equation; it is equally important to determine the value of its stock, which, at any given time, may be overrepresented or underrepresented by its market price. After all, even the world’s greatest company will fail to meet investor expectations if the price paid to buy it exceeds its intrinsic value.

We determine the intrinsic value of a stock on the basis of expected future cash earnings. An important consequence of this approach is that it serves to eliminate from consideration any industry or company whose prospects are uncertain and whose earnings are unpredictable, unsustainable, or difficult to measure over a reasonable period of time.