At GINIM, we have a simple objective: to compound our partners’ capital at high rates of return over long periods of time with minimal risk of permanent loss of principal.
To do this, we focus on maintaining a margin of safety by only investing in significantly undervalued securities, as measured by our conservative estimates of either:
The rate at which we expect the investment to compound over our holding period, or
The price that a private buyer would pay for the entire business
Our general strategy is to make meaningful investments in high quality, predictable businesses that can be expected to grow intrinsic value at high rates and that are currently available at cheap prices.
Investing in undervalued stocks of high quality businesses allows our investment returns to come from two possible sources:
- The internal results of the business (the operating results)
- The market’s “revaluation” of the business (multiple expansion)
Our approach involves thinking of each investment as a business owner would. When I buy a stock, I imagine that I’m buying 100% of the business and retaining management, which helps me to think more about things that impact the long-term value of the business and less about things that impact the short term fluctuations in the stock price.
As owner-minded investors, we prefer to make investments that have the following attributes:
- Simple, predictable businesses
- Consistent profitability (high returns on capital and free cash flow)
- Favorable long term prospects and reinvestment opportunities (compounding ability)
- Shareholder friendly management
- Significant value (cheap price)
- General Investment Tenets
Our investment strategy is a well-known formula, but to successfully execute it, we find it helpful to adhere to the following principles:
- Think like a business owner
- Think independently and maintain a patient, disciplined, long-term approach
- Invest in businesses that are easy to understand
- Focus on avoiding mistakes and reducing risk—“Margin of Safety”
- Invest only in significantly undervalued securities
- Focus on businesses that are compounding value
- Make meaningful investments
We believe that a conservative, disciplined, patient approach to buying significantly undervalued stocks of high quality companies that are growing shareholder value is the best way to achieve our goal of compounding our capital at high rates over the long-term with minimal risk.