Investment Philosophy
What is Investing? An Art or a Science?
- When investing one’s hard-earned money, a question always prevails about whether one should trust the passion of Art or the precision of Science?
- Investing is generally referred to as an art of stock picking. This theory is broadly based on the judgement and experience of the investment manager. But with experience comes biases. So, what can help in overcoming the same?
- The process and discipline of Science.
- We at WhiteOak, feel that to achieve sustainable performance, one needs a combination of Art and Science. Art is the skills of the investment team, executed with the application of investment science.
- Thus, our philosophy is to believe in “The Art and Science of Investing.”
Investment Philosophy
Outsized returns can be earned over time by investing in great businesses at attractive valuations.
Great Business
Well managed and scalable business, with superior returns on capital
Attributes we look for
Factors we evaluate
Superior returns on incremental capital
- Industry competitive intensity
- Sustainable competitive advantage
Scalable long term opportunity
- Industry potential versus current size
- Expanding market share & scope
Strong execution and governance
- Drive to create long-term value
- Interests aligned with minority shareholders
Valuation
Current price at a substantial discount to intrinsic value
Our Valuation Framework
Insights We Derive
Intrinsic Value = Present Value of future cash flows
- Economic FCF rather than accounting one
- Terminal value based on greatness of business
Value excess returns on capital vs capital employed
- Assess cash flows net of cost of capital
- OpcoFincoTM multiples for relative comps
What's More?
We bring the balance of Art and Science in our approach with a team of investment professionals and processes regulated by our trademark OpcoFincoTM Model. A few more factors of our investment process are:
- We have a simple yet powerful process of investing in businesses based on stock selection rather than betting on macro.
- We believe outsized returns can be earned over time by investing in great businesses at attractive values. A great business is one that is well managed, scalable, and generates superior returns on incremental capital. Valuation is attractive when the curr
- We seek to invest in companies with strong or improving fundamentals and do so when they are trading at a substantial discount to their intrinsic value.
- We generally avoid businesses with weaker characteristics such as poor corporate governance, weak returns on incremental capital, and businesses that face substitution or obsolescence risk.
We look for investment opportunities that represent a powerful combination of business and value while avoiding weaker combinations. These are the two critical pillars of our investment philosophy – business and valuation.
**To sum it up, we firmly believe that Investing is a combination of Art and Science and maintaining a balance between both.**
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