“Investment is most intelligent when it is most businesslike”
– Benjamin Graham

Value investing is based on the belief that the market is efficient at assessing the value of companies in the long run, but in the short term stock prices do not always reflect the intrinsic value of the underlying business.

Value investors seek to take advantage of this situation by purchasing shares of companies trading at a discount to their estimate of this intrinsic value. This discount provides a margin of safety (a concept introduced by Benjamin Graham) and, if the estimate is correct, an attractive risk-reward ratio.

At Bristlecone we aim to be experts at valuing businesses in order to identify those stocks whose shares are trading at a discount to intrinsic value. The keys to our investment process are:

• New investments are made at a minimum price-to-value discount of 30%;
• Stocks are sold when prices reach intrinsic value, when the long-term fundamentals of the company have deteriorated (value impaired), or to reallocate capital into an investment trading at a greater discount;
• We concentrate on our best ideas. Our typical mature portfolio includes fewer than 40 holdings;
• Portfolio is constructed one idea at a time, from the bottom-up, with no pre-determined industry allocation;
• Cash position is a by-product of the flow of ideas in and out of the portfolio; and,
• Annual portfolio turnover is typically below 30%, resulting in low transaction costs and fewer capital gains over time.

For more information about our philosophy and process, please read the Q&A with Bristlecone’s portfolio managers (See News/Articles)