We follow a long-term value investing strategy. Our investment time horizon is more than three years and in most cases, the time frame is higher than this. We are sector agnostic, and most of our investments are in Large and Mid-cap companies. We usually avoid small-cap companies unless we perceive a margin of safety. We pick our stocks based on a bottom-up analysis. Some of the metrics we use to filter the companies for further analysis are:
ROE > 20% PEG < 1.5 Low or no debt
At Nighthawk, when analyzing investment prospects, corporate governance takes precedence over financial metrics. We do not like companies with a lot of subsidiaries. Such companies are difficult to analyze and, in our experience, we have found that companies with weak corporate governance often have unnecessary subsidiaries (esp. offshore subsidiaries). We like companies with an easy to understand the business model and would shun companies which use complex accounting techniques. We prefer companies that finance growth through internal accruals and not by raising debt. As long as the underlying fundamentals are sound, we are not worried about short term market fluctuations.
We take concentrated positions in our investee companies and at any point in time, our portfolio will consist of 10 to 20 companies. We are usually fully invested and do not time the market.