The Rubber Hits the RoadUn-Common.
Exclusive to Gentry Capital, the Un-Common Sense Investment Theory creates, grows and protects our client wealth.
Our Gentry Capital Investment Theory
Our investment philosophy is the guiding principle at Gentry Capital. While Gentry Capital advisors do not only offer equity-based solutions, they will always default to Un-Common Sense for the equity sleeve of the plan. The theory is protected by copyright (2004) and cannot be used or reprinted in any form without the express written permission of Gentry Capital; however, we will offer a portion herein as a sampler.
From the initial universe of companies available for scrutiny, we pare down to only those publicly-traded companies which match three main tenets. These “Red Light-Green Light Indicators” must all flash “green” to be considered. Any investment candidate not meeting all three criteria collectively will be excluded.
- Invest only into those companies dominant in a particular sector. These companies are absolute market leaders or members of an oligopoly within an industry or sector and;
- Invest only into companies that are involved in a growth industry or sector. Market leaders in dying industries be avoided (for example a dominant coal miner) and;
- Invest only into companies that produce a product or provide a service that the consumer or end-user would gladly and willingly pay more for than a readily available competitor’s product.
Following this initial process, the theory considers other factors such as profitability, debt-load, insider activity, governance, employee relations, etc. These set criteria although not as important as the ones previously listed are still core to the analysis and identified as the “Yellow Light Indicators”
Each of these products give rise to a firm that meets all of the criteria. In each example the company is (1) DOMINANT in its industry… is (2) positioned in an industry that is growing…and (3) sells a product that the consumer (or retailer in the case of the credit card company) is willing to pay ‘more’ for than a competitor’s product…due to some extra perceived quality (it will never rely on being the lowest price to get the sale). These three indicators represent a huge ‘barrier to entry’ for competitors, and create what is referred to as a ‘wide moat’ around their businesses.
The paradigm shift of this philosophy versus ho-hum conventional thinking is that the investor need focus their analysis on the “business” of a business as opposed to the “share price” of a business. The investor should apply the majority of their analysis on the business, and whether it meets the aforementioned criteria, as opposed to fixating on the share price and mathematical ratios. Warren Buffett rails against academics who are still espousing theories based on “rational consumer thinking” completely ignoring how consumers actually behave. Therein lies the crux of the problem – others try to use ratios using rational thought processes in an attempt to describe irrational events. For example, the fact that nearly 3/4 of consumers continue to purchase a certain brand of expensive ketchup because they “think it tastes better”, is actually irrational. And to date there is no math – new or otherwise – that can be applied to predict the outcome of such an irrational thought process; that is, until Un-Common Sense came along.
Un-Common Sense© Steven M. Barban, 2004
Gentry Capital – Ottawa, Canada