We have a rigid rule that if a position is down at least 15 percent from our cost, we force ourselves to either buy more or sell. Human nature in such situations is just to hold, but if our conviction on the idea is intact, we're happy to see it down 15 percent so we [...]

We're very focused on how much money we can lose. What's the hard asset value? What protection does the balance sheet provide? We stress test the business using draconian assumptions and compare the worst-case scenario with what we predict will actually happen. We want $4 to $5 of upside for every $1 of downside. We've [...]

The metric we care most about is what we call reinvestment cash flow, which is essentially earnings before interest and taxes, plus depreciation and amortization, minus maintenance capital spending. We look out three years and want to see the reinvestment yield the company earns increasing relative to its enterprise value. Then using a discounted cash [...]

We primarily focus on understanding the unit economics of the business. In a retailer,for example, we have to understand how one store works: what are the capital requirements and maintenance spending, how does the lease work, how does the cash flow build? This is the way managers in the field think, and we find this [...]