PSG Asset Management

At PSG Asset Management, we believe that by only investing in high quality companies and always paying less than fair price, we are able to both reduce risk and optimise return for our clients at the same time.

This approach requires a combination of discipline and hard work.

We use three beacons to define the unique portion of the equity universe within which we invest. These three criteria we call Three M’s: Moat, Management and Margin of Safety.

Moat: A company’s moat refers to some form of sustainable competitive advantage it enjoys. A competitive advantage determines both the quality of a company’s current earnings as well as its ability to increase the asking price for its products or services. When deciding whether or not to invest, we need to be confident that we understand a company’s moat, and will thus only invest in clear and understandable businesses.

A company’s strong market position is of little value to shareholders if it does not translate in due course into free cash, which is then distributed in the form of dividends. Cash flow and dividends are therefore important considerations in our decision making.

Management: The management of a business is critical to its success. We therefore seek to invest in companies which are managed by individuals with a track record of creating wealth for shareholders. As a prerequisite, this management must report honestly and transparently on the business’s operations and financial position. We are particularly attracted to companies where the management of the company holds significant equity in these businesses as this creates a greater alignment of the long-term interests of the company with those of its shareholders.

Margin of Safety: This refers to the difference between what you pay for a company and what you receive in return. We want to pay significantly less than our estimate of fair value which leads to a significant reduction in risk and also results in higher potential returns.

These three Ms dictate our daily actions, but over the long term we must adhere to three Cs:

We must apply our philosophy consistently.

Our estimates of the fair price for companies must be conservative.

Our actions must be contrarian, i.e. buy in times of panic and sell in times of euphoria.

Our approach to investing is a medium to long term strategy which, we believe, will reward investors who have entrusted their capital to us.