Research Process

As a nimble, focused team, wisely allocating research time is paramount. We narrow the market of U.S. public companies into a carefully-curated universe of businesses that possess the qualitative and quantitative characteristics that create lasting value for owners. It is within this collection of businesses that we spend the vast majority of our research time, developing a deeper—and at times differentiated—understanding of individual companies and industries.

ECONOMIC ADVANTAGES

Economic advantages take many forms. The concept is relatively simple: A business can produce something society demands at a price that another cannot. We seek to understand how companies create value and what obstacles exist that preclude competition from entering markets.

GROWTH

We invest in growing businesses within growing industries. We favor those that can do so with modest amounts of incremental capital and with a high degree of predictability.

LEADERSHIP

Management is the link between a business’ underlying economics and shareholder returns. Is leadership investing to increase its capabilities? Is the company focused on customer and other stakeholders’ success? Is growth being pursued with return on capital in mind? Are share repurchases being made in relation to intrinsic value? Does management have skin in the game? These represent just a few of the questions we attempt to answer in understanding the quality of a company’s leadership.

ROBUST FINANCIAL POSITION

Strong financial footing is a must. There is no substitute for cash on hand and abundant free cash flow. We analyze debt levels in the context of cyclicality, the nature of fixed versus variable costs, and capital intensity. Higher amounts of each command more judicious use of financial leverage.

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INVESTMENT PHILOSOPHY

IRONVINE STRATEGIES

INVESTMENT TEAM

SELECTED COMMENTARY

“It’s extremely difficult for humans to forgo a near term reward in exchange for a greater reward at some unknown point in the future. It should be no surprise, then, that it is rare to find a management team with a compensation system that pushes the organization to make rational decisions for long term owners. Incentives are generally centered around the notion of growth—growth in revenue, growth in margins, growth in earnings, or the gold standard—growth in earnings per share. But not all growth is good growth. Some creates value, while other types destroy it.”

Q1 2017 Letter

“We also take great interest in how companies finance themselves. Certain business models have debt-like advantages without interest payments, maturity dates, or covenants. The float generated by a well-run insurance operation, a working capital cycle that generates cash from the timing mismatch between customer collections and supplier payments, and a bank’s market-rate deposits that operate as a perpetual source of cheap capital all provide funding advantages obtainable by only a few businesses.”

Q1 2017 Letter

“Concentrating our capital in outstanding businesses provides an opportunity to produce above average results over time, regardless of the market environment.”

Q4 2019 Letter

“Our aim is to own a collection of businesses that don’t require us to continually sell and reposition. Companies with numerous opportunities of their own to reinvest, that remain in financial position to play offense on our behalf, and that in some cases stand to benefit from near-term disruption.”

Q1 2020 Letter

“The businesses we covet exhibit the ability to grow their earnings power during good times and hold the line during bad. Their fortunes tend not to be dictated by the actions of competitors nor the prevailing economic tides.”

Q2 2020 Letter