“The stock market is filled with individuals who know the price of everything, but the value of nothing.” - Philip Fisher
PHILOSOPHY
VIEWING STOCKS AS VESTED OWNERSHIP
The core of our investment approach involves purchasing stocks with the same principle as buying an entire business outright while retaining management. First and foremost, we consider ourselves business analysts - not stock analysts.
The true value of a company is the net cash flows expected over its business life, discounted by an appropriate interest rate. Only when a company can be purchased at a significant discount to this calculated value, will the investment be considered.
LEVERAGING VOLATILITY TO OUR DISTINCT ADVANTAGE
On average, individual stocks fluctuate more than 60% in a 52-week period. Volatility doesn’t equate to risk and may offer extraordinary opportunities. Cash positions (up to 30%) allow us to take a unique advantage.
CORE COMPETENCY
We don’t claim deep knowledge of all industries or investable opportunities. There are simply too many stocks and industries to do so with diligence. Rather, we aim to invest only in areas with proven track history and subject-matter expertise. We honor the boundaries of our knowledge-base, yet strive to expand through continuous improvement of our craft.
KEEP THINGS SIMPLE - RATIONAL COMMON SENSE GOES A LONG WAY
We believe simplicity is key. Complicated investments do not equate to higher returns. The investment industry has become over-complicated with enormous spreadsheets and unnecessary back-tested quantitative models. Over-reliance upon these “tools” often results in a false sense of precision, with more time wasted “data-crunching” and less time critically thinking. This often results in sub-par returns. We don’t over-analyze whether a business is anticipated to earn $5 or $5.25 next quarter. Instead, we constantly seek and simply focus on finding big gaps between the current price and a conservative estimate of intrinsic value.
CONCENTRATE OUR CAPITAL ON THE BEST IDEAS
There are few “high-quality” businesses and management teams in the market – and even fewer available at favorable prices. Fiercely competitive markets, combined with finite resources, make it rare to find attractive investments. We actively engage in between 6-15 investments at any given time.
RISK MITIGATION
At Luther Capital, we are aware of various risks that may be inherent in our portfolio and operations. However, it is important to note that we don’t view portfolio or securities mark-to-market volatility as risk.
Instead, our approach to risk management focuses on minimizing unforeseen investment risk and only risk up to 2% of AUM per investment.
The following risk guidelines are designed with this intention in mind:
Before deploying capital into a new investment, we undergo a thorough research process of potential companies, which often entails 100+ hours and months of work.
The goal of this extensive work is to ensure we have deep knowledge pertinent to investments. This includes reading through historical fillings, relative strength, moving averages, price history, earnings reports, public interviews, review suppliers, calls with industry experts, due diligence on C team personnel, and much more.
WHERE WE DIFFER
We focus on short-term vs long-term investing. Other Investment firms hold a minimum of 18 months, resulting in market exposure risks and the inability to compound your returns respectfully.
