All true investing is founded on an assessment of the difference between price and value; we’re intent on paying a price lower than the value we receive. There’s about 2000 companies listed on the Australian Stock Market (ASX). If you imagine those 2000 companies like a restaurant menu, on most days it offers a menu full of bland, unhealthy, fully priced choices.
We’re devoted to an endless search for a highly compelling investment situation. The single most likely reason for a share price to rise is because it was unvalued in the first place. We spend a terrific amount of time reading. We see our job as essentially just corralling more and more facts and information and occasionally this may lead to some action. Every day, media, a share register, a share price or a company announcement will point you in the right direction. That’s when we start to think, watch and wait. We’re incredibly selective about what we’re buying. Sometimes we watch companies for years waiting for the share price to represent outstanding value. Typically, we’ll only come up with two or three really good ideas a year. If we can’t find a good idea, we don’t invest anything.
You simply cannot buy something cheaply unless there is some bad news. We believe that buying unloved, cheap companies where share prices are at all-time lows is a far more successful strategy than buying them when there’s lots of popularity built into the share price. We don’t pay for popularity.