As disciples of Warren Buffett and Charlie Munger, GFI Investment Counsel CEO Daniel Goodman and vice president Effie Wolle focus on value. They look for businesses with a sustainable competitive advantage at a reasonable price. And when the company is good enough, they are willing to pay a bit of a premium.
“If you are buying a greatquality business with a durable competitive advantage, I think it is okay to pay up,” Goodman says.
Finding good management is another focus at GFI, as is avoiding serious capital depletion.
“It’s not always about what you buy, it’s about what you don’t buy.” Goodman says, adding that GFI watches the Street but does all its own analysis.
“We try to invert the situation, especially when it is an issue brought out by corporate finance or an investment bank,” he adds. “Why are they raising money? Why are they diluting equity stakeholders?”
Wolle stresses that GFI sticks within its circle of competence, avoiding names like Sino-Forest Corp., Yellow Media Inc. and Research In Motion Ltd.
“We avoid dying industries or business models that are too difficult to understand,” he says.
In the first six months of 2011, private client accounts rose roughly 4% to 6% by owning quality companies that pay good dividends -and avoiding the bad ones.
The managers will do some opportunistic trading as well as take short positions in the Good Opportunities Fund. It has the same approach as private client portfolios.
The fund currently has a higher-than-average cash position of around 24% due to the sale of a favourite name, international shopping warehouse club company PriceSmart Inc., which has risen very dramatically.
“I don’t think the cash level is a macro call -expecting the market to bottom out,” Goodman says. “It’s just a question of our comfort level.”
“We’re not finding any great things to do with the money, so we hold the cash,” Wolle adds.
Holding a significant cash position is a typical defensive strategy. These days with low interest rates some say it doesn't get you very far. But how does a 1% gain or a 0.50% gain look against a 5-10% loss? That's the decision that investors have to make when markets are pulling back or are volatile for macroeconomic reasons...
Happy Investing,
The 360 Investing Guys
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