Fundamental Approach

Our Philosophy

Empiric’s fundamental research team’s CIO (formerly Harper Capital) has over 27 years’ experience identifying global investment opportunities and a track record of outperformance.

We invest in durable (anti-fragile) businesses that trade at an attractive discount to their intrinsic value. We believe that investing in businesses that are less likely to be disrupted and can survive for the long-term (over ten years) will allow our investments to compound at a superior rate. We view the risk to investments as the “risk of permanent loss of capital” rather than volatility. Investing in durable businesses, investing after rigorous due diligence and investing at an attractive discount to intrinsic valuation (building a margin of safety) is the process to avoid “permanent loss of capital”. Our portfolios are concentrated and have high active share.

Our Process

The investment process is a multi-step process, it starts with a quantitative screen to narrow the investable universe to a working list that undergoes our primary due diligence methodology. This involves a qualitative assessment of the company’s business and the industry in which it operates, an in-depth review of financial metrics to support the qualitative assessment and a determination of the intrinsic value of the company, and country-specific risks. Additionally, we look at the company’s corporate governance, assess quality of management and determine if there are potential catalysts that could result in better valuation.

Criteria to Identify High Quality, Durable Franchises

Barriers to entry or identifiable moat
Sustainable competitive advantage
Leader in the marketplace
Robust culture and organizational practices

Criteria to Identify good Corporate Governance

Proven management team with a record of execution
Proper incentives and accountability of management
Alignment with shareholder interests
Capital allocation decisions that benefit shareholders (dividends, buybacks, and reinvestment).

Criteria to Identify Positive Valuation Catalysts

Management change
New product lines, pricing, or distribution
Temporary/Short-term addressable issues
Restructuring opportunities
Improved country-specific business policies

Criteria to Identify Attractive Financial Metrics

Strong free cash flow and earnings quality
Organic growth and recurring revenue
Balance sheet strength w/ reasonable levels of debt
Sustained high returns on invested capita
Expense and operating leverage

Risk Management

Position Size Limits

Country and Sector exposure

Stress Testing Analysis

Stop loss trigger of investment thesis


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