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At E.S. Barr & Co., we invest as if we were buying into a private business. Consequently, we focus on the
economic results of the underlying business, not reported earnings and seek to partner with excellent management
as measured by past results. Perhaps most importantly, in order to protect against miscalculation or unknowable
events, we seek a wide margin of safety between the market price and the intrinsic value of the underlying business
before we commit capital. We believe that over time operating results, not daily price quotations, determine whether
our investments are successful. Because even though the market may ignore business success in the short-term, it
will eventually confirm it.
Our philosophy can be further explained by the following points:
Absolute versus Relative Return
Our approach dictates we only purchase securities when we feel that there is an attractive "absolute value." We will not engage in purchasing an overvalued company just because it is "relatively attractive" versus an even more overvalued company. This is a normal occurrence elsewhere, when some parties feel compelled to buy, or recommend, securities with little attention paid to price and value. We buy when companies are "absolutely" attractive.
Lack of Diversification
We concentrate investments into companies and industries that we understand. When we find such companies available at an attractive price, we want to participate in a significant way.
Holding Period
We are content to hold indefinitely, so long as the operating results are satisfactory, future prospects appear promising, and the market does not grossly overvalue the business. As Warren Buffett said: "Time is the friend of the wonderful business, the enemy of the mediocre." Thus, it is our inclination to be long-term investors rather than active traders.
Quality Businesses- "Franchises"
We buy quality businesses at a good price. We buy companies with an economic franchise which is defined as (1) offering a product or service that is desired; (2) is thought by customers to have no close substitute; (3) with high barriers to entry; and (4) is not subject to price regulation. The existence of these conditions is demonstrated by a company's ability to consistently earn a high rate of return on capital.
Our philosophy can be further explained by the following points:
Absolute versus Relative Return
Our approach dictates we only purchase securities when we feel that there is an attractive "absolute value." We will not engage in purchasing an overvalued company just because it is "relatively attractive" versus an even more overvalued company. This is a normal occurrence elsewhere, when some parties feel compelled to buy, or recommend, securities with little attention paid to price and value. We buy when companies are "absolutely" attractive.
Lack of Diversification
We concentrate investments into companies and industries that we understand. When we find such companies available at an attractive price, we want to participate in a significant way.
Holding Period
We are content to hold indefinitely, so long as the operating results are satisfactory, future prospects appear promising, and the market does not grossly overvalue the business. As Warren Buffett said: "Time is the friend of the wonderful business, the enemy of the mediocre." Thus, it is our inclination to be long-term investors rather than active traders.
Quality Businesses- "Franchises"
We buy quality businesses at a good price. We buy companies with an economic franchise which is defined as (1) offering a product or service that is desired; (2) is thought by customers to have no close substitute; (3) with high barriers to entry; and (4) is not subject to price regulation. The existence of these conditions is demonstrated by a company's ability to consistently earn a high rate of return on capital.
Philosophy
1999 Richmond Road, Suite 1B
Lexington, KY 40502
(859) 266-1300
E-Mail
Lexington, KY 40502
(859) 266-1300
Price is what you pay. Value is what you get. - Warren Buffett