Emma Capital Partners Investment Approach
Investment Philosophy
We invest where we find value in companies which we believe will generate a significant excess return on capital invested. We have the flexibility to invest across the capital structure. We require a significant margin of safety based on our cash flow driven valuation metrics to invest. Our funds will employ low levels of leverage.
Security Selection
We buy companies that have simple, understandable business models, and generate strong free cash flow. We try to identify companies with a high level of profitability based on a strong competitive position in their core business.
We believe that companies with pricing power and cost discipline should generate strong profit margins and an attractive return on capital over a full business cycle.
We invest in these companies at a significant discount to our estimate of intrinsic value.
Risk Management
The binding constraints in portfolio construction are liquidity and diversification (country, sector, stock). We construct our portfolios to provide investors with stable investment returns while focusing on capital preservation. There is a 5% portfolio drawdown limit at which point portfolio net exposure is halved (selling longs). Limits at the stock level are a relative negative 5% return. Position limits (long and short) are set at a maximum of 5% and minimum of 1% of NAV.
