As followers of value investing philosophy, we consider a company’s fundamental value as its most important aspect. Most our time is dedicated to identifying the value of those companies in which we invest.

Prices are provided by the stock market, which rarely correspond to the real value of the business.

In the short term, the market is subject to emotional and impulsive behaviours, where price and value rarely converge. Rationality however appears over time, and in the long term, prices tend to be equal to value.

The continuous discrepancies between value and price, as a result of emotional aspects in the market, lead to significant investment opportunities.

Experience demonstrates that the majority of the market players, as human beings, follow a process based upon emotions, timing and perception. Such behaviour generates market anomalies.

Long term success in investing depends on the manager’s attitude when buying or selling and on his ability to remain calm, rational and cold at all times.

We do not aim to buy companies “which are on the up”, either because their future forecasts are highly encouraging, or because of a generalised positive opinion within the market.

We do not buy expectations, we buy realities trading below their fundamental value. We are investors, not speculators.

Speculation bears no negative connotation whatsoever, we simply believe that it is the most risky way to invest. A market player speculates when purchasing a company with the hope that its price will go up, “betting” on future expectations. An investor “invests” when he purchases a company at a low price, being less dependent upon the future, which is by definition uncertain and unknown. We believe that a significant part of an investment’s results depends on the purchase price, more than on the sale price.

We do not spend a lot of time trying to predict the future, attempting to establish the exact trend in a company’s volume of sales or profits. Our time is dedicated to determining whether a business is being sold for less than what it is really worth.

In the game of predicting the future, the worst possible result is to be exact with such predictions, as this leads to a feeling of self-confidence and being less cautious.

Predictions generate expectations which, as a general rule, do not usually take place. This creates interferences and uncertainty which may be taken advantage of by the intelligent and patient investor, who sells when everyone wants to buy and buys when everyone wants to sell.

Magallanes’s objective is to preserve and increase our clients’ capital by overperforming the market in the long term. We believe that the only real risk is the permanent loss of capital.

We shall aim to prioritise the preservation of capital over expectations of high returns should there be a significant probability of losing the invested money. The power of interest compounding over a protected amount of capital represents the most powerful combination for the generation of wealth over time.

We are conscious of the asymmetric effort required recover of significant losses. A loss of -50% is not recovered by an increase of +50%, but rather by an increase of +100%. The efforts required are significantly increased the greater the loss, for example, in order to recover a loss of -25% we would require an increase of +33%, in order to recover a loss of -75% we would require an increase of +300%.

We are fully aware that we manage our investors’ money. We feel responsible for it, and only through open and direct communication may we ensure that our clients feel informed and taken into consideration at all times.

Communicating and explaining what we do, and why we do it, is one of our key hallmarks. We do what we say that we do, with detailed explications at all times.

In all, we provide all information we consider relevant and which we would like to obtain ourselves, if we were clients.

We are not immune to the possibility of making mistakes. Our job is done being fully aware of this. Should they happen, they are accepted and acknowledged, and we aim to not repeat said errors in the future.

Likewise, we shall aim to solve any errors with the minimum possible impact to our clients, and to learn important lessons from our mistakes.

We are fully committed to the quality of our management, which prevails over size. Should the time come, and depending on market conditions, such commitment could lead to a soft or hard closing of the funds.

Based upon admiration and mutual professional respect, we value the opinion of each and every member of the Team. Honest, intelligent and hardworking people, with passion and a strong vocation for what they do.

We thoroughly enjoy what we do and are always keen to improve and continue learning.

Reputation is a highly valuable asset for us. One of our challenges is to be a reference in the asset management industry, the company most sought after by investors and the best place to work.