Process Defined

Our investment process, labeled Grade A Manitou, has been designed to achieve two goals: preserving and growing capital. Key to this process is determining the quality, actual (intrinsic) value and margin of safety of each potential investment.

As the chart below illustrates, the process begins by screening the investment universe for companies with high returns on invested capital and strong balance sheets. We then further restrict ourselves to those companies demonstrating a sustainable competitive advantage and effective management. This results in a quality grade being assigned. Only companies that meet our minimum quality threshold merit investment consideration.

After formulating a solid opinion of what the company is worth (its intrinsic value) we assign a ‘Margin of Safety’.

Each qualifying company is then placed on a Master List, we call it our ‘Master Control Sheet’, where it is ranked based on the return opportunity.

All Manitou equity mandates are populated with companies from the Master Control Sheet, subject to diversification and risk control criteria. Continuous monitoring at the security level forms the basis for our purchase and sell decisions.

We have built a rigorous investment process, designed to meet our primary objectives of preservation and growth of capital.

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Margin of Safety

A Margin of Safety is the discount between a company’s stock price and our estimate of its intrinsic value. This margin of safety is an essential element for capital preservation as we pay significantly less than what the company is worth. In addition, a discount provides an enhancement to returns as the margin of safety gap closes.

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Master Control Sheet

The Master Control Sheet ranks investments based on the relative return opportunities. This is calculated by comparing the current stock price to our intrinsic value and required margin of safety. The quality grade dictates the maximum percentage weight, at purchase, for any investment.