At Sims Capital we invest for the long-term. Our preferred holding period is forever, but at the very minimum, we approach every potential investment with an expected 3- to 5-year holding period. The purpose of holding stocks for such a long time span is to allow premium companies to generate strong profits (and gain from stock price and dividends) and limit tax liabilities by locking in long-term capital gains.
As value investors, we agree with Benjamin Graham's insight that a share of stock is a piece of an ongoing business. As such, we try to understand and value an underlying business before we think about buying the corporation's stock. Once we understand a business well enough and can value it with a high degree of confidence, we are only comfortable purchasing the stock when we can do so at a significant discount from its intrinsic value (the value a third party would pay for the entire business). Buying in such a disciplined manner provides us with a "margin of safety" (in Ben Graham's vernacular)--- this simply means that even if our valuation is a little off (say the real value is only 90% of our estimate) there is still ample room for appreciation. We prefer to buy stock at a 33% discount (a price that is 67% of intrinsic value), although we may go as high as 75% of intrinsic value for platinum quality companies---- firms with strong brands, strong balance sheets, and great growth prospects.
Research and patience are at the core of our investing strategy.
Using Intrinsic Value as a Guide, Stock Bargains Are Rare (Milwaukee Journal Sentinel)
Colgate Takeover Odds Rise Amid Megamergers (Bloomberg)
Cash Is King in Terms of Investment Flexibility (Milwaukee Journal Sentinel)
Every Good Company Not Best Investment (Milwaukee Journal Sentinel)
Past performance does not guarantee future results. Any cited performance represents past performance; future performance may be lower or higher. The investment return and principal value will fluctuate so that an investment, in the future, may be worth more or less than the original cost. Returns do not reflect the effect of passed-through capital gains.
An investor should consider an investment’s objectives, risks, and charges and expenses carefully before investing.
* Registration with the Securities and Exchange Commission or any state securities authority does not imply a certain level of skill or training.