We prefer to learn about our companies directly – we don’t rely on what Wall Street has to say. We believe there is value in doing things the old-fashioned way. Reading annual reports and proxies. Listening to company management presentations. Deriving our own estimates of company value.
Another thing we have started to do is to schedule calls with the companies we own or are researching. Over the past several months we have spoken to the CEOs, CFOs or Investor Relations executive at nearly 50 companies.
The executives we call often tell us that our calls with them are structured differently than the calls they have with many other firms. We ask them to describe their competitive “moat” and what sets their company apart from others in their industry. We discuss with them the long term growth prospects of the business. And, we ask each company to address their views on capital allocation – their plan for the free cash flow generated by their business.
Nearly every call helped us develop a deeper understanding of the company and the prospects for future profitability and growth. We have found them to be a valuable part of our research process.