BBH Core Select (“the Fund”) employs a long-term business ownership approach within a discount to Intrinsic Value framework. Our objective is to provide investors with long-term growth of capital. We seek attractive absolute returns while reducing the risk of permanent capital loss in each individual investment. The investment process is driven by a bottom-up, fundamental analysis of individual businesses.
We seek to invest in established, cash-generative businesses that are leading providers of essential products and services with strong management teams. We purchase the publicly-traded equity securities of such companies at a discount to their intrinsic values. Estimates of intrinsic value are based on proprietary analysis of prospective free cash flows and returns on capital. We apply a disciplined investment selection process focused on business, management and financial attributes.
BBH Core Select will generally hold investments in 20-30 companies with market capitalizations greater than $5 billion that are headquartered in North America, as well as in certain global firms located in other developed regions. The targeted holding period is three to five years. Investments are typically sold if they appreciate above our estimate of intrinsic value.
By applying our criteria consistently and adhering to our process, we aim to provide attractive risk-adjusted absolute results for our clients over the long-term. Our key guiding principles are the following:
- We believe that companies that possess specific business attributes, management attributes, and financial attributes are well positioned to create value for investors through varying economic and market environments.
- We feel that the quality of a business and its ability to grow over time are closely linked. Our selection process focuses on owning businesses with leading competitive positions in healthy, growing industries. We focus closely on understanding the cash flow characteristics of each business. It is our expectation that revenue growth, free cash flow growth and management’s ability to effectively allocate capital will be key drivers of a business’ ability to increase its intrinsic value over the long-term.
- We purchase securities when we can identify a Margin of Safety which we define as a meaningful discount between the market price at which a company’s shares trade and our estimate of a company’s intrinsic value. We typically seek to purchase businesses at 75% of our estimate of intrinsic value. We believe that the benefit of investing with a margin of safety is that it provides added downside protection against permanent capital loss and the potential for significant value creation.