We follow an intensive process to discover, understand, and invest in leading business franchises.
SRC, LLC Firm Summary
We pursue six interrelated steps:
- We systematically review approximately 1,000 companies listed on U.S. equity exchanges with market caps generally above $100 million to result in our investable universe, which currently consists of about 200 business franchises.
- Throughout this process, we employ rigorous due diligence in reviewing our existing group of companies while also assessing new candidates. We pursue a continual process of learn, hypothesize, evaluate, and relearn.
- In assessing a specific investment candidate, we develop our understanding of the industry supply chain, the competitive set, product differentiation, and the threat of new entrants. We analyze the company's historic valuations and the reasons for variance in this record. This process includes reviewing public filings and presentations, searching out quantitative and qualitative sources of information, speaking with company management, and, when appropriate, visiting company facilities.
- If the company meets our investment criteria, we complete a proprietary quantitative model and thorough written assessment. The model emphasizes competitive differentiation between the business and its direct competitors. We wait for the target company’s valuation to tip the risk-adjusted return scale in our favor. If this occurs, we invest with the idea of owning the company for years.
- We continually monitor company execution and industry dynamics to confirm, or not, whether an ongoing investment is appropriate.
- We maintain a strong sell discipline that incorporates performance of the stock and its valuation, size of the position in the portfolio, and relative downside risk versus other opportunities.
We highlight the result of this process in our Select Holdings section.