We invest in public companies through open market purchases, private placements and private stock transactions.
At DME Capital, equity selections are based not on popular trends, but instead on an evaluation of long-term profitability as measured by cash flow return on investment (CFROI). Put simply, a company's CFROI trend is essentially a "report card" on management - Are they successfully pursuing wealth creating opportunities within their markets and improving cash flow or are they destroying shareholder wealth by investing in new projects that produce only inferior returns?
Our research (due diligence) begins with an exhaustive analysis of public information and broader industry and economic data to identify investment opportunities. From this, we conduct a direct analysis into the company which includes one-on-one meetings with senior management, channel checking (i.e., meeting with a company's client list, vendors, middle management, etc.)
On average, every month we meet with 30+ CEO's of publicly traded companies to determine if their company is a good investment.
Before we invest or an Investment Report is issued, you will find the discipline of DME Capital already at work. We believe that by staying attentive to high quality companies with sound managements, healthy balance sheets, and proven revenue and cash flow growth, we are best able to produce consistent and competitive returns. And even though the latest stock tip may be intriguing, it often comes with a greater risk. Our approach is to find companies with minimal risk.
In looking for superior companies with attractive cash flow growth prospects, we never lose sight of the other critical ingredient of the investment equation - the price of the stock and liquidity. Our disciplined research sets forth an optimistic, baseline, and conservative valuation target. Only when we deem an issue sufficiently undervalued relative to these price targets will it become a candidate for recommendation.
Lastly, we believe in managing diversified equity portfolios with exposure to the major economic sectors. Finding companies where management is committed to improving shareholder value by generating rising cash flow returns is not specific to one sector or industry group.
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