Finding Value in Unlikely Places
As the Forager name suggests, our style of value investing involves scouring the world looking for unloved opportunities. Perhaps best described as a hybrid of the Graham and Buffett styles, we view both asset backing and earnings power as useful valuation tools, depending on the type of business we are investing in.
Like Buffett, we like buying high quality businesses if they are available at reasonable prices. But, like Graham, we also believe there is an appropriate price for everything. Buffett himself has said that he would invest very differently with smaller pools of money (his company, Berkshire Hathaway, has more than US$100bn in investments).
Our small size gives us the flexibility to do just that. If the potential returns are high enough, we have no qualms investing in mediocre businesses. And if the situation demands it, we are prepared to be activist in order to realise the value inherent in a company’s shares. Both approaches have worked well for us over the years and our aim is to stay.
Our Investment Edge
Forager concentrates on buying shares in businesses at prices we believe to be substantially less than their underlying value. Then we wait for the market to correct this mispricing. That is the essence of value investing – buying dollar coins for 50 cents.
This is more difficult than it sounds, which is why we have a rigorous research process and healthy debate within the team. Businesses change and stock valuation is an inexact science, so we only invest in stocks where the gap between our estimate of value and the current share price is large enough to compensate for the uncertainty.
We focus predominantly on small and mid size businesses both in Australia and Internationally.