Principles

Because processes have been known to go bust when conditions change, we want to be sure that the supporting principles are, in themselves time-tested and robust. The principle is:- If we have the comfort of time on our side and the stocks that we own are backed up by real businesses generating adequate earnings relative to our price at entry and the cost of the company’s capital employed, then we are getting richer by the day, no matter where the market goes. If we get the “3-Rights” right, time is our friend. In the short term, price and value may not converge but over the longer term it surely must. This is the “invisible hand” of the market at work and Economist Adam Smith wrote volumes about these basic laws and principles of economics centuries ago.

In practical terms, what this means is that we will keep our investments through the most long-drawn negative, depressed and unstable market or economic conditions that you can imagine, provided we are sure that the 3-Rights investment criteria continues to be intact and the fundamentals of the underlying businesses have not changed. We do not sell just because other people are selling (or buy just because others are doing so).