In managing and allocating assets under management, Casa de Investimentos employs a Value Investing philosophy, first introduced in the 30’s by professors Benjamin Graham and David Dodd and made popular by one of the greatest investors of all times, Warren Buffett. This is the investment method that delivers better, more consistent returns over the medium and long term. Value Investing perceives equities as an investment in real businesses that must be carefully followed and analyzed. Value Investing means buying good assets at a price considerably lower than what they are worth, that is, with a discount to its intrinsic value. Intrinsic value is estimated through exhaustive fundamental analysis of the company’s financial accounts.
In the long term, equities are the assets that better protect and grow invested capital. A study of average annual returns for different asset classes in the USA since 1926 shows that inflation was about 3%, short-term T-bills returned 3,6% and long-term Government Bonds around 5,5%. Equities’ average annual return was about 9,9%, showing clearly that this is the asset class that better protects and rewards capital.
Those that have done it consistently throughout their careers delivered some of the best investment results over the last 100 years. It is a simple philosophy, easy to understand and based on good common sense. Since it requires focus, discipline and detailed analysis of the opportunities, it allows us to take advantage of market volatility/irrationality rather than being driven by it. Low turnover of investments assures low transaction costs. All these factors lead us to the conclusion that this is the only safe and rational way of investing our capital.
The biggest risk an investor takes is that of a permanent loss of capital. We consider price volatility a poor measure of risk, since it is frequently not correlated with the intrinsic value of the business.
We look for good opportunities in geographies that minimize exposure to political, social and economic risks. As such, you should expect that the vast majority of our investments are made in developed regions, with an emphasis on North America and Europe.
Casa de Investimentos does not use derivatives nor leveraged accounts to make its investments. We consider that those instruments add additional risk of permanent loss of capital.
We seek to identify investment opportunities that should materialize in the medium-to-long term. In the short-term markets are temperamental, often misevaluating assets based on present concerns. However, in the long run equity prices should reflect its intrinsic values. Thus, our investment process implies little turnover, focusing on the long-term value creation.
