3G Capital Management investment philosophy is based upon belief that investing in a small collection of undervalued securities underlying high-quality businesses yields superior results over an extended period of time.
Therefore, the cornerstone of our investing strategy is investing in a concentrated portfolio of equity securities that fit the following criteria: (1) good business, (2) good management, and (3) good price. More specifically, we are looking for well-managed businesses that are competitively entrenched, generate high returns on invested capital, and carry little debt. Equally important, we are seeking to purchase these businesses at a significant discount to their intrinsic values.
It is important to note that seeking businesses that possess sustainable competitive advantages implies excluding from the list of potential investment opportunities businesses whose economics are too difficult for us to assess, such as software, biotech, commodities, etc. While this approach leaves us with a significantly smaller investment universe, the remaining businesses boast a substantially higher degree of predictability, which helps us make more accurate assessment of their intrinsic values, thus reducing the risk of permanent capital loss.
Our target holding period is approximately two to four years, as we realize that it takes time for a security to reach its intrinsic value. To ensure that we have ample time to wait for long term capital appreciation we normally avoid shorting and using borrowed funds to make certain that an external event may not force us to sell an undervalued position before the value realization has occurred.