You will grow to the level of your vision. If you are not expanding your vision regularly you will plateau your business, its services and its wealth potential. The leader with the greatest vision, clarity and greatest certainty will give rise to the greatest business. Those with a vision flourish. Those with a great cause to serve the world touch the world.
- John Demartini
- John Demartini
It's all about the Strategy...
Having, and sticking to, a strategy is a critical first step toward creating wealth. The founding partners of Richland Investment Holdings (Richland IH) have very strong opinions regarding Richland's investment strategy and philosophy. The strategy starts with the asset classes we choose to focus on.
Richland IH focuses on four main asset classes:
These asset classes reflect the areas of competence of the founding members of Richland. Next, our strategy requires a consistent investment philosophy, defined below, for all asset classes. |
Our Value Investing Philosophy
Our investment philosophy starts with a very simple statement “we invest, we don’t speculate”. The difference can be considered subjective, but at Richland we see a clear distinction between investment and speculation. Firstly, an investment approach relies on a well understood, analytic philosophy designed to deliver superior investment returns over time. Speculation on the other hand relies on spotting trends, taking chances, and does not consider capital protection. With our investment approach we look toward businesses that are easy to understand, have a durable competitive advantage, have high quality management with a lot of integrity and energy, and finally have a selling price that is below its intrinsic value (temporarily). From this it is clear that our investments and returns are not based on chance, it is based on a fundamental analysis of the earnings power of the underlying asset. We look toward the assets earnings power to justify the price we pay for owning a share of the asset.
At Richland we do not look at share prices every day or every week. We invest based on business fundamentals. The business fundamentals of a solid business do not change on a daily or weekly basis. Therefore, if we considered a company good enough to invest in yesterday, we are pretty confident that company will still be good enough today and tomorrow. Most people however look to the market to guide them when making investment decisions. When we, on the other hand, consider investments we ignore the market completely because we believe the market to be manic depressive, behave irrationally, and be driven by the human emotions of fear and greed. Therefore, we choose not to use the market to instruct or guide us, we choose to use the market to serve us. We prefer to take advantage of the ups and downs of the market, to our advantage, rather than the market taking advantage of us.
At Richland IP we don’t believe that diversification necessarily leads to improved performance or protection against risks. In fact, owning many stocks poses its own risks in as much as the more stocks you own the less you can know about the stock you rank last versus the stock you rank first. If you don’t know everything about every investment you make, you are putting your capital at risk and that goes against our investment philosophy. As a result diversification can easily lead to diworsification and therefore we diversify only when the fundamentals of our philosophy support it.
Richland does not engage in any form of leverage. Leverage has landed many people in a lot of trouble in the past. If we don’t have enough capital to invest at any given time we will simply wait for the next investment opportunity to present itself. In the meantime we work toward increasing our available capital by attracting more partners. Some people call this a conservative approach, but we believe that it will keep us out of trouble and keeps us from temptation.
At Richland buying a good company at a fair price suits us better than buying a fair company at a good price (the cigar-butt approach). We try our best to buy R1 for 80c. We call this 20c difference our margin of safety. This margin of safety allows us to earn high returns on our investments and creates a comfortable safety barrier. However, when presented with a good company that complies with our investment philosophy we will invest, even when available only at a fair price. In saying this we believe the dominant driver of returns to be the starting valuation. Therefore, when purchasing assets at prices low relative to intrinsic value then long-term returns tend to be high. The opposite is true when purchasing assets at prices that are high relative to intrinsic value.
Part of our philosophy includes the fact that we will not make investments if we are not presented with any good opportunities. Therefore, we are often in a position where we do not deploy available capital if we can’t find any excellent investment opportunities. Capital is therefore not deployed just for the sake of deploying it. Having capital at hand when a proper investment opportunity presents itself is worth more to us. To summarize, we are independent thinkers that make investment based on simple, solid principles only and don’t deploy capital simply because other people are doing it.
We strive to allocate our capital as efficiently as possible. We therefore take the profits of one of our investments and reinvest it in another where the capital will yield higher returns. We believe this approach is rational and factual as opposed to emotional and based on assumption. At Richland it’s all about compounding capital at the most effective rate over long periods of time.
We are not a flashy investment partnership. We are a cost conscious investment partnership, who likes to keep things basic. This is aligned with our personal value system, which is focused around wealth creation over a long period of time by consistently compounding capital at the cost of short term gratification. We don’t judge other peoples investment approaches but we are confident that our approach, sometimes called unconventional, works and we are happy to stick to it. We don’t expect any recognition or praise, we expect only to produce above average returns for our partners. Our expectation is simply that our partners would think of us as honest, trustworthy, and reputable while allowing us the opportunity to invest their capital wisely.
Finally, we pride ourselves on our focus on people and go to great lengths to invest back in our community and larger society. We love understanding people, while at the same time teaching and mentoring other people about our investment philosophy and approach to leadership. We realize the school of life is open every day and if we don’t learn and teach every day we will all fall behind. We embrace people and we believe giving is living. We strive toward growing every day and the more we grow the more we can give. Richland's approach is as much about contributing to society as it is about compounding capital and creating wealth.
Happy Investing!
Myles Rennie
Investment Manager
Richland Investment Holdings