Rockridge Investment Partners focuses on acquiring high quality growing businesses at attractive prices. While many value investors look for companies with low price to earnings or price to book ratios and end up owning below average, no growth businesses, we favor high quality growing businesses that trade at a discount to intrinsic value.
We will have about 15-20 investments. We prefer to maintain a meaningful financial position in fewer companies than to have smaller investments in many holdings that would dilute our comprehensive understanding of each business. New investments will be made with an intended 3-5 year investment horizon.
Process
Our investment process is driven by company specific research with little regard to macroeconomic factors. We tend to look for high quality companies first and price/valuation second. High quality companies have created sustainable competitive advantages enabling them to earn high returns on their capital employed. In addition, we look for businesses with recurring revenues, strong internal revenue growth, prudent capital structure and proven management with a focus on per share results.
We use various tools including stock screens to highlight companies that have those characteristics. Once a business is identified we read all relevant SEC documents, develop financial models and begin discussions with management.
If, after a thorough review, we are not compelled by the business, it is unlikely that any price would be low enough. If the business is attractive and the price affords us a comfortable margin for error, we will buy it. If the current price is not compelling, but the business is, then we will add it to our wish list. The wish list, built up over many years, has become a growing source of new investment ideas. Given our detailed understanding of the businesses on our wish list, we are able to act quickly during dramatic price declines.
Risk
We do not adhere to conventional thinking that risk is proportional to reward or that risk is equal to volatility. We view risk as the potential for capital erosion. Downside protection is our first priority. The opportunity for dramatic returns on our capital is the second.
We mitigate risk by finding businesses that we can value with confidence and by waiting for the right price. By focusing on growing companies, where the intrinsic value rises each year, we have an additional safety measure built in. In the absence of share price appreciation, the discount to fair value rises each year, which increases the expected return.
Code of Ethics
Our most valuable asset is our reputation. We will take every measure to ensure that our actions, real or perceived, are beyond reproach. Integrity will be our hallmark.
Partners will receive quarterly updates on the performance of the Fund, annual audited capital account balances and prompt responses to any questions that arise.
