Per share value – This is the crux of Starvine’s investment philosophy. The key determinant of success in any long term stock holding is the increase in per share value, not overall growth in the top line. Starvine focuses the majority of its research resources on growing, cash generative businesses that are operated by managers with strong records of reinvesting earnings (i.e. capital allocation) to the advantage of shareholders.
“The big money is not in the buying and the selling … but in the waiting” original
Buy with a
Margin of safety
Buying each company at a valuation that can withstand stress-testing for adverse macro/micro developments or estimation error is key to long-term compounding. Starvine believes cheapness can often be its own catalyst and present asymmetric risk/reward opportunities. At the least, having a strict discipline of not overpaying is critical to protecting principal.
Starvine runs a concentrated investment strategy to focus clients’ capital into the highest conviction ideas. The strategies will typically hold between 13 and 25 companies, while employing risk controls to ensure the strategies are not overly exposed to one position at any given time.
Circle of competence
Starvine focuses on businesses within its realm of understanding. The investment strategy seeks companies with clear moats or characteristics in place that are conducive to pricing power. Additionally, the portfolio manager tends to prefer businesses that demonstrate resilience to economic cycles while having potential for long-term organic growth.
Idea generation process
Starvine distinguishes between large and small market capitalization companies in the idea generation process. The current strategies have a strong presence of mid-cap holdings (i.e. companies in the US$1-10 billion market cap range), with the caveat that the Mid-Large Cap Strategy contains more large cap companies versus the Flagship Strategy. The distribution between small- and large-cap companies within Starvine’s investment strategies is expected to vary over time, guided from a bottom-up point of view.
Quality is a broad term
Quality as the primary focus
Quality is a broad term. Starvine prefers to own businesses with attractive economics, financial flexibility, and operated by managers incentivized to act as owners.