Philosophy
Key investment attributes
Blue Ocean invests in innovative companies with sustainable competitive advantages.
Each company’s management is fully aligned and typically founder involved. We invest in growth businesses with strong cultures and significant management ownership, allied with the discipline to invest at valuations that deliver superior medium & long-term returns.
Blue Ocean is an intrinsic value investor. We invest in management who place a strong emphasis on long-term strategy. The best managers are good capital allocators and make long-term strategic investments, often at the expense of near-term earnings. We invest in companies with strong balance sheets that don’t require further funding and which prioritise economic value creation over accounting earnings.
What makes us different from other value investors is that we apply intrinsic value philosophy to companies with substantial growth opportunities, often in high-growth industries. We take advantage of short-term share price overreactions that don’t impact the value of the business but which do present great opportunities for investment. Long-term investing works because the market focuses on the short-term, making insight about the long-term more profitable.
Blue Ocean invests in global developed markets and focuses on smaller companies. Seeking investment in high-quality, smaller businesses is fertile ground. These companies outperform over the long term since they are less researched and often overlooked by investors and brokers. We focus on companies with market caps between $1B and $10B.
Firm values
A partnership approach is core to the firm. Communication to clients is open and holdings are transparent. The firm pays all trading and research costs directly and there are no fees for client withdrawals. All client funds are held by a custodian in the name of the client.
An independent and unorthodox thought process. All of our work is proprietary, bottom-up, with a long-term intrinsic value focus. We maintain our independence of thought and action by doing all of our work.
Long-term risk avoidance is fully integrated into our investment process and is in place from the beginning to the end of our analysis. This allows us to invest for the long term with confidence that identifiable risks will not stop an investment thesis short.
The firm is unconstrained by indices. The attention to indices and market returns does not serve most investors well as we believe that each investment in the portfolio should be made on an absolute basis. We invest only when a company is so undervalued that there is a margin of safety.
In order to make better decisions, we make fewer decisions. This means that we typically hold a concentrated portfolio of 10-20 companies. Focus leads to better results. We have only one strategy. That strategy focuses on only one type of company: the winners of tomorrow.