Our investment philosophy at Genos is simple. Buy income generating assets, mainly corporate bonds and equities, at a discount to intrinsic value significant enough to provide a comfortable margin of safety to reduce our risk of permanent loss of capital while earning a satisfactory expected return.
We know that we have absolutely no control over the market price and therefore do not time the market. We only care if the price is low enough to entice a purchase, or high enough to sell our interest and we rely on the dictum that if we are right about the fundamentals of the company the market price will eventually agree with us. We do not use any leverage or derivatives, nor do we go short the market and are therefore free to operate without exposure to market volatility. This allows us to have a long-term mindset and hold until we believe value has been realized.
Balance sheet value: Firms that trade at a discount to their readily available net asset values / liquidation value but do not earn high returns on capital deployed and whose margins are usually comparable to the industry average. These are usually average quality companies selling at great prices. Value in these types of investments is realized through asset liquidations and special distributions / share buybacks / dividend payments.
Income Statement value: Firms that trade at a premium to book value but at a discount to their future earnings power. These are usually high-quality companies selling at decent prices. Companies such as these are usually asset – light and consistently generate lots of cash year after year, require minimal reinvestment into the business and can distribute a large proportion of the cash generated to investors as dividends.
We invest if we believe the business to have some type of competitive advantage that will protect its earnings power over our investment horizon.
We consider companies that have
a management team in place who
is honest, able and who have proven themselves to be shareholder friendly.
We are valuation sensitive. We will invest only if the market price gives us a significant discount to what we believe to be a conservative estimate of intrinsic value.
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