Tom Russo of Gardner Russo & Gardner

http://www.valuepodcast.com/153#t=1:39.221

Investment Mandate:

  • Consider great businesses and great managers, then align yourself with them for the long-term
  • Buy a business with a margin-of-safety and that is capable of reinvesting; you are not just buying the discount between price and value you are buying the companies ability to sustain or increase earnings power
  • Growth comes from a companies capacity to reinvest
  • focus on owning brands that the consumer covets; these consumers are more likely to pay a premium regardless of market conditions

 

Brand Analysis:

  • a business is permitted to show¬†profit losses while it is engaged in building a durable brand
  • guard against commitment buys
    • continue to be critical of your portfolio businesses after ownership
    • be watchful and interpret company news in a neutral manner
    • be mindful of technology shifts
  • look for companies that have a capacity to reinvest

 

Portfolio Management:

  • Shifts equity from overweight positions to underweight positions when they have high valuations
  • Steps that consume reported profits are the engines of future growth
  • how will these reinvestment opportunities transform the business?

 

Reinvestment

  • it is important to gauge how reinvestment will impact future earnings
  • growth related spending will burden the income statement
    • will have high up-front costs such as depreciation
    • these investments will not generate any earnings in the short-term

 

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