Investment Philosophy | Ironvine Capital Partners

FOCUS ON ESSENTIAL BUSINESSES

We own businesses—not pieces of paper—whose results are the product of people going to work and employing capital to build goods or services. Our research centers on companies embedded within large, growing end markets offering mission-critical products and services in ways that add—rather than extract—value. These businesses are often characterized by entrenched competitive positions and highly recurring revenues.

DEMAND AN ATTRACTIVE FINANCIAL PROFILE

We gravitate to businesses with high and sustainable returns on capital, attractive reinvestment opportunities behind their core strengths, abundant free cash flow, and strong balance sheets. We keep the bar for inclusion in Ironvine strategies intentionally high as our results should, in time, mirror those of our constituent businesses.

PARTNER WITH ALIGNED MANAGERS

Because we are minority shareholders, we favor businesses led by executives who think and act like owners. We prize long-term thinkers with prudent risk appetites and a penchant for deploying capital in ways that consistently increase per-share value.

MINIMIZE ACTIVITY

Having acquired a collection of outstanding businesses at reasonable prices, our bias is inaction. Rather than deftness in entry and exit, we anticipate our returns being primarily driven by durable increases in the underlying cash flows of our portfolio companies.

PURSUE LIKE-MINDED INVESTORS AS CLIENTS

Building and maintaining a foundation of fellow business owners—not stock price watchers—with a long-term time horizon and the temperament to ignore the noise inherent in public markets enables us to make sound investing decisions.

INVEST HEAVILY ALONGSIDE OUR CLIENTS

We believe in our approach. Ironvine Capital and our strategies constitute the overwhelming majority of each of our partners’ net worth.

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“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