Investment Principles
Simple & Understandable Business Model
We will seek businesses with a simple and understandable business model with a clear fly-wheel to underpin growth over the 5-10 year investment horizon.
Will avoid situations where there are intrinsic risks that are hard to quantify or probability-weight.
Formidable barriers to entry
We are looking to invest in companies that have long-term sustainable competitive advantages, significant barriers to entry, or “wide moats,” around their business, and low risks of disruption due to competition, innovation or new entrants.
Given the stage of maturity that we are investing at, we are open to considering companies where the moat has not yet fully developed, but where at a business life-cycle end state, we can see that a moat can be created.
Simple, predictable, and free cash flow generation
We will generally seek companies with a track record of free cash flow generation and a predictable expectation that the company can generate future sustainable growth in cash flows over the long term.
Given the stage of maturity that we are investing at, we are open to considering companies that may be cash-flow neutral/negative, if we have a clear line of sight that the business’s cash flow will become positive within a reasonable amount of time.
We will seek companies that are easy to predict cash flow conversion from accounting profits avoiding companies with high levels of maintenance capex, working capital, variance of cash to accounting profit.
Catalyst for value creation
We only invest in opportunities where there is a meaningful catalyst for value creation that can be evidenced. Ideally this catalyst will be an unique investment perspective or angle that will form part of the investment thesis and align with management’s strategy.
Growth Tailwind
We will seek to invest in companies and industries that are the beneficiaries of structural growth tailwinds that can assist the company to grow meaningfully over a 5-10 year horizon.
Attractive valuation & Asymmetric return profile
We will seek companies at an attractive valuation relative to their long-term intrinsic value with a margin of safety.
We are seeking opportunities with significant return asymmetry with and significant opportunity to generate high opportunistic returns for the assessed risk.
Downside case demonstrates low probability risk of permanent loss of capital. Base case provides high probability of attractive investment returns generated from free cash flow yield and earnings growth.
Upside case provides meaningful probability to deliver outsized returns from execution of value creation catalyst and business valuation re-rating.
Exceptional management and governance
We will seek companies that have trustworthy, talented, experienced, fit-for-purpose, and aligned management teams. We will seek evidence that they have been able to build a broader team that is stable and motivated.
These companies may be led by founders/entrepreneurs who are looking for a partner to execute on the next stage of their growth. In these instances that require additional management/board governance, we will leverage our network to identify appropriate talent who can assist with investment due diligence and operational execution.
Limited exposure to extrinsic factors that we cannot control
We will seek companies that are not materially affected by macroeconomic factors, commodity prices, regulatory risks, interest rate volatility and/or cyclical risk. If there are extrinsic factors, we will use our network (where possible) to deeply understand them and ensure they are appropriately factored into our investment decision.
Strong balance sheet & Governance
We will only use leverage conservatively relative to a business’s free cash-flow generation through a cycle.
In situations where we are not investing for control, we will seek appropriate governance protections (Board & Key Material Decisions).
Compounding effect of high RoCE for future investment
We will seek companies that can benefit from broader access to the capital markets (especially where they exhibit high return on capital employed for incremental capital expenditure). We will typically avoid businesses that are highly reliant on the capital markets to operate and grow their businesses.
Attalis Capital Beliefs
We seek ways to find out information others won’t
We are existentially flexible and open to doing things differently
We avoid losing money before we try to make money
We can find value by avoiding the herd
We don't time the market