The Selective Process
Selective Wealth Management focuses on quality by establishing positions in companies that possess six distinct characteristics. A company that possesses all six characteristics is considered a Selective Company.
Lasting Products or services
A Selective Company possesses a product or service that has a high competitive moat and low probability of obsolescence. Selective avoids companies whose products or services can be easily replaced, investing in companies that are viable in the long term.
Durable Competitive ADvantage
When a company has a durable competitive advantage, they are hugely successful whether or not competitors charge more or less. In fact, Selective Companies may even be able to raise their own prices, and still continue to thrive.
Another characteristic of a Selective Company is their ability to operate their business at highly profitable levels. Companies that achieve large profit margins through either selling at high quantities, high prices, or reduced costs.
Prudent Debt Levels
A key component to identifying a Selective Company is understanding their debt levels. Selective focuses on businesses that can achieve exceptional earnings with little to no debt.
Skillful reinvestment of earnings
Most companies retain the majority of their profits. However, Selective Companies as seen as ones who reinvest earnings in highly profitable projects, building wealth for years to come. Selective invests in companies that successfully demonstrate this skillful reinvestment of earnings.
World class leaders
Not all leaders are created equal. Selective looks for CEOs and managers who exhibit passion in their work as well as their ability to build strong teams to carry their vision forward.
Patiently Wait for an attractive Price
Even if a businesses possesses all six characteristics of a Selective Company, it can still be a poor investment if the price paid for is too high. Selective aims to purchase Selective Companies at a discount to its intrinsic value. Attractive prices are obtained through patience.