Ramos Capital Group follows a value investment philosophy
This entails the purchasing companies below their intrinsic or fundamental value, we buy at a discount, and always looking for the highest ESG standards in our companies.
Explicitly, our attention is continuously placed on the best integrity, honesty and good faith standards by the companies under analysis. Companies that not only maximize profit in the income statement nonetheless care for and improve the environment and social stakeholders, are the clear long-term winners. Profitability and respectable work go hand in hand.
Majority of our time is devoted to determining the fundamental value of a company. This is the price which a well-informed market player would be prepared to pay to obtain control There are many different methods of determining such value, including market multiples, net asset value or discounting normalized profits or cash-flows, among others.
RCG buy companies when there is a significant difference between price and fundamental value.
Margin of Safety
Margin of Safety is a concept that helps investors avoid overpaying for a stock and reduce the risk of losing money.
It is the difference between the intrinsic value of a company and its current market price, expressed as a percentage.
It does not indicate how much a stock can appreciate in the future, but how much margin of error there is in the valuation process.
It is a subjective and dynamic measure that depends on the quality of the analysis and the assumptions used.
- A company's history reflects its performance more reliably than its future projections, which tend to be overconfident.
- To estimate the intrinsic value of a company Ramos Capital Group, we follow these steps:
Assessing the company's ability to generate profits across the business cycle.
Examining the historical annual reports and financial statements.
Identifying the competitive edges of the business, if any.
Analyzing and evaluating the non-financial ESG factors.
Applying valuation ratios to the operating income or cash flows that the company can produce across the business cycle. This is complemented by discounting cash flows and/or simulating the liquidation of the operations.
Ramos Capital Group
We look for inexpensive companies. First:
1. Elevated returns on invested capital.
2. Decent financial management, with small debt or in the process of debt reduction, or net cash in the balance sheet.
3. Quality companies, with competitive advantages.
4. Overlooked and penalized by the market.
5. Managed by truthful managers aligned with shareholders, respectful of the environment and committed to social stakeholders, in essence, companies with high ESG standards.
Type of company where we typically find value:
1. Holding companies, or companies with multiple businesses, problematic to comprehend by the rest of the market.
2. Hidden assets and/or profits, not recognized in the accounts.
3. Small and middle-sized companies which are generally not noteworthy within the market.
4. Companies providing unfortunate results in the short-term in their quarterly results.