Bertley’s approach to investing comprises four steps:
1. Avoid big mistakes
2. Select good companies
3. Buy quality at a fair price
4. Hold for the long term
“An investor needs to do very few things right as long as he avoids big mistakes,” Warren Buffett.
Bertley is highly selective in choosing investments to avoid big mistakes. This cautious approach may lead to missing out on some good ones.
First, we apply a risk filter to eliminate big mistakes. We stay away from:
1. Low-quality companies
2. Bad industries
3. Bad managements
4. Unaligned ownership
5. Companies with high-debt
6. Fast-changing industries
7. Merger and acquisition scenarios
8. Fear of missing out
Second, we shortlist businesses based on historical high-ROCE of 20% or more over the past five to ten years. This approach screens out hundreds of low-quality businesses but might exclude some potential winners.
A high ROCE indicates that the management team allocates capital effectively, have built a durable competitive advantage, and have room for innovation and growth compared to peers.
Next, we apply additional filters to create a final list of companies to track for investments.
A strong business has a durable competitive advantage, high ROCE, stable management, minimal debt and operates in a slow-changing industry.
Warren Buffett believes MARGIN OF SAFETY the cornerstone of investment success.
We patiently wait for the right price. The market is efficient, but not always. Occasionally, market fluctuations provide opportunities to buy high-quality businesses at attractive valuations. We wait for those few occasions and seize such golden opportunities.
After investing, we ignore market fluctuations. Our minimum holding period is five to seven years unless our thesis is wrong.