By operating excellence, we mean companies that demonstrate the ability to achieve profitable growth over time whilst maintaining a healthy balance sheet.
Profitable growth is important for competitive companies to be able to attract and retain skilled and highly-motivated staff. Only those companies that can demonstrate the ability to grow profitably can give skilled staff motivational challenges in the long-run. Profitable growth is also important as the value creation from profitable growth forms the basis of our returns as a long-term investor.
A healthy balance sheet is important as access to financing varies over time. When the markets are booming, access to financing is easy. However, when markets are weak, financing is more difficult to obtain. Nevertheless, the best opportunities for profitable growth often occur in weak markets. That is why we believe it is vital for companies to maintain the flexibility to act also in weak markets. Only those companies with a healthy balance sheet enjoy such flexibility.
Strong competitive position
ODIN invests in companies that create value over time. With our long-term perspective we believe it is paramount that companies have a sustainable business model where management has the vision and capabilities to implement the measures needed to create and underpin long-term competitiveness.
By attractive price, we mean that the price we pay is favorable relative to the companies’ profit performance and ability to pay dividends. Attractive price is important because the price we pay determines whether we realise good returns on our investments.
At ODIN, we have learned that good risk assessment is necessary in order to achieve good returns. That is why we have formed our opinion of the risks we should take, and those we must avoid. As a long-term investor, we do not worry about the general fluctuations in the capital markets. As long as the companies we invest in create value over time, we perceive such fluctuations as opportunities to increase returns through favorable buying and selling. The real risk is when the companies we invest in do not perform well, causing a permanent loss in value for our customers. Thoseare the types of investment we aim to avoid. That is why we invest in companies with operating excellence, capable management and a strong competitive position.
Good investment decisions depend on good judgment. Good judgment is only possible with relevant knowledge and experience. At ODIN, we know the companies we invest in, and we know why we chose them. They are companies we believe will create value over time.