This article is excerpted from a letter authored by Samer Hakoura, principal at Alphyn Capital Management, based in New York.
I look for great public companies that have the power to endure, with long runways to grow through reinvesting cash flows at high rates of return, run by talented and aligned operators. This unpacks as follows.
At its most fundamental level, investing is about paying an amount of money today with the expectation of receiving a future stream of cash flows who’s present value, when discounted at an appropriate rate, exceeds the amount paid today. The greater the difference, the higher the Margin of Safety and the better the profit. Very basic, but I think the point frequently gets lost in unnecessary complexity, especially when prices react so vigorously to general economic news and quarterly results.
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