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Consistent Philosophy, Process For 31+ Years

We are long-term value investors in businesses that meet our high standards – those that are well-managed, financially powerful, and attractively priced.

Investment Philosophy

SIMPLE & CONCENTRATED

The principle of Occam’s Razor is a central tenant in how we manage our business and investments. Developed in the 14th century by Franciscan philosopher William of Ockham, Occam’s Razor is a means to simplify complex models and create more predictive outcomes. Using this construct, we strive to break through unneeded complexity to focus our research on the few critical variables that differentiate an ST Capital business from average businesses — strong and durable competitive advantages, excellent management, and financial strength.

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Investment Process

INDEPENDENT RESEARCH & ANALYSIS

We allocate capital to a select group of exceptional companies run by skilled management teams who have a track record of creating competitive advantages, reinvesting in their businesses, and making wise capital allocation decisions with cash flow.  We then own these businesses with their stock prices trade below our assessment of fair value—our margin of safety. The result is a high-quality, concentrated portfolio that first seeks to preserve capital and then seeks growth of capital. 

REINVEST

Competitive Advantages

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  • Strong brands

  • Pricing power

  • Low-cost producer

  • Increasing market share

  • Innovation

Excellent Management

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  • Experienced and dedicated

  • Alignment of incentives

  • Effective capital allocation policy

Financial Strength

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  • Free cash flow

  • Operating margins

  • Return on capital

  • Low financial leverage

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VALUATION METHODOLOGY

We look to be long term investors in a company and invest like an owner. We use a combination of valuation methods to determine fair value and invest only after building an additional margin of safety.

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RISK MANAGEMENT

Position Sizing:

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Initial position sizing ranges from 1% - 2% and is determined by:

 

  • Discount to intrinsic value

  • Risk/reward profile

  • Correlation with other investments

  • Conviction

Diversification Principles:

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  • 30 - 40 securities

  • Sector exposure is normally 0 to index weight + 10% points

  • 5% maximum per individual security

  • Portfolios are fully invested with cash levels normally below 5%

Sell Discipline

Our sell discipline aligns directly with our buy discipline: companies must be well-managed, financially powerful, and attractively priced. Securities are sold when they no longer meet these criteria. 

Exceeds Price Objective:

Each investment has a price objective and an investment thesis that outlines how we achieve this objective. We sell a security when its valuation no longer meets the attractively priced criteria.

Fundamental Deterioration:

We sell a security when there is material or relatively permanent deterioration in the fundamentals of the company, whereby it is no longer well-managed and/or financially powerful.

More Attractive Opportunities:

Our portfolios are fully invested; therefore, we sell a security when a more attractive investment opportunity is identified.

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