Investment Philosophy I - Asset Classes
- Forum only invests in companies:
- Companies have the possibility to re-invest profits and cash flows internally at return rates which are not available to a financial investor. The Intrinsic Value of such firms can thus grow exponentially due to the effects of Internal Compounding. No other asset class offers this possibility.
- All studies about the long-term performance of asset classes show that investments in companies, especially stocks and private equity, have generated the highest returns to investors.
- A lot of outstanding companies are managed by persons, whose personal values are comparable to ours, more than in other asset classes.
Investment Philosophy II - Circle of Competence
- We invest only in sectors which we can fully assess: we want a high predictability, where the business will be in 10 years.
- by tendency „old economy“
- no technology-companies.
- Historically we invested in the following sectors:
- Manufacturers with >30% After Sales Business (Consumables, Service or Spare Parts)
- B-to-B Services
- Med Tech and Healthcare Services
Furthermore we are open for other sectors as well.
Investment Philosophy III - Risk
- We define risk as the permanent loss of capital. Price fluctuations on the capital markets are not a risk for us. As long as the business model of our investments is intact, the intrinsic value will increase.
- Our past experience shows that the biggest risk factors have been:
- making non-rational decisions due to mental biases or lack of discipline
- deficiencies in our management system
- inconsistencies in our investment philosophy.
- The companies we are invested in tend to have strong balance sheets and are strongly cash-generative. Due to their recurring revenue characteristics they tend to be less cyclical and have pricing power. We are confident that a crisis would not endanger the continuity of these companies.