What is Business Perspective Investing? 


Business Perspective Investors start from the premise that there is no philosophical distinction between part ownership (i.e. buying shares in a company) and outright ownership (i.e. buying the business in its entirety). All we are looking for is pieces of businesses to buy at the right price.  

Warren Buffett put it thus: 

“Stocks are simple. All you do is buy shares in a great business for less than the business is intrinsically worth, with managers of the highest integrity and ability. Then you own those shares forever.”¹  

Criteria for Stock Selection 

It follows that there are several important criteria that companies selected for investment consideration must exhibit in abundance. 

Among these are that:  

Their business model is easily comprehensible;  

They produce transparent financial statements;  

They demonstrate consistent operational performance with earnings being relatively predictable;  

They generate high returns on capital employed;  

They convert a high proportion of accounting earnings into free cash;  

Their balance sheet is strong without unduly high financial leverage;  

Their management is focused on delivering shareholder value and is candid with the owners of the business; 

Their growth strategy is more likely to rely on organic initiatives than frenetic acquisition activity.  

Buy when the Odds are in Your Favour 

Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause their share prices to be misappraised. Again as Buffett puts it, “Price is what you pay, value is what you get”.²  Having identified a universe of truly outstanding companies, we must wait until their shares can be bought at a price on the stockmarket that is substantially less than their true economic worth.

References:

 ¹ Warren E. Buffett, Forbes, 6 August 1990
 ² Warren E. Buffett, Letter to Partners (Buffett Partnership), July 1966

     

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    Sanford DeLand Asset Management

    8th Floor
    111 Piccadilly
    Manchester
     M1 2HY
     
     Tel. 0161 233 8696
    contact@sanford-deland.com

  • Sanford DeLand Asset Management is a trading name of Castlefield Investment Partners LLP (CIP), used under licence. CIP is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange. Registered in England & Wales No: OC302833. Registered Office: 8th Floor, 111 Piccadilly, Manchester, M1 2HY. 
     
    Please note that Warren E. Buffett does not endorse or sponsor the CFP SDL UK Buffettology Fund.

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Sanford DeLand Asset Management

8th Floor
111 Piccadilly
Manchester
M1 2HY

 

 Tel. 0161 233 8696

contact@sanford-deland.com

Sanford DeLand Asset Management is a trading name of Castlefield Investment Partners LLP (CIP), used under licence. CIP is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange. Registered in England & Wales No: OC302833. Registered Office: 215-219 Chester Road, Manchester, M15 4JE. 

Please note that Warren E. Buffett does not endorse or sponsor the CFP SDL UK Buffettology Fund.