Drystone Concentrated Investments

Durability is the key.

Drystone difference:
In making new investments Drystone seeks potential catalysts (positive events or changes to fundamentals) and a stock price well below a growing intrinsic value per share, but Drystone’s overriding investment objective is durability.

Our ideal investment is a company that can sustain favorable fundamentals and a reasonable stock valuation over a long holding period. Drystone does not like to sell, obviously not when we must for bad reasons (increasing company risk and deteriorating fundamentals) but also not for good reasons (excessive increase in investor attention and stock valuation).

Drystone does not view investments through an artificial lens of growth versus value or company size, but the popular semantics closest to our Concentrated Investments philosophy are

  • income and growth at a reasonable (or better) price
  • a broad range of market capitalizations (company size) with a tendency toward mid-caps

Concentrate equity investments in companies which share our mindset and time horizon.

Drystone discipline:
Drystone seeks to purchase – for the most attractive entry price possible – a share in the hard work of people who
  • operate in industries without destructive levels of competition
  • can grow a company for a long time
  • will not sacrifice per-share profits or cash flow
  • can manage business risks
  • demonstrate integrity and respect for shareholders
  • preferably toil in relative obscurity (i.e., a cheaper stock price)
Drystone difference:
Drystone is not averse to short-term (less than 3 years) catalyst-driven situations and will certainly avail our clients of any we uncover and view with conviction, but our primary focus remains on viewing common stock as equity in a business and over a longer time horizon.

Follow a clear path to locate a compelling set of investment attributes.

Drystone discipline:
Drystone employs a clearly-defined investment process which sets the hurdles for any potential investment very high. We review...

...industry structure – competition; regulation; customer dispersion; barriers to entry; substitutes.

...growth potential – product life cycle; product innovation; total potential market; market shares; income growth v. balance sheet growth.

...financial, management quality – cash flow generation and uses; sources of capital; management tenure; internal manager development; management vision/execution; unions; pensions.

...treatment of shareholders – agent-owner alignment; cash and equity compensation; acquisition history; share issuance/repurchase; dividends; insider ownership.

...stock valuation – discounted cash flow models; trends v. income and balance sheet items; volatility.

Drystone LLC investment portfolio manager