Stacey Muirhead Captial Management



Our investment approach utilizes time-tested principles of intelligent investing. Achieving a superior investment record is a lot harder than most people think and developing investment wisdom comes from both direct experience and a willingness to absorb lessons from others. We have been fortunate to study and learn from the experiences and writings of super investors such as Warren Buffett, Sir John Templeton, Peter Lynch, and many others.

Over time, we have identified the following enduring principles, which we judiciously apply to our investment efforts:

  • Think about stocks as part ownership of a business.
    When we buy stocks for our investors, we have a mindset like that if we were buying into a private business.
  • Maintain the proper emotional attitude.
    It is often the case that fear and greed drive stock market prices. We strive to tune out the daily noise that is swirling about and attempt to use market fluctuations to our advantage.
  • Insist on a margin of safety.
    We only make a purchase when we judge that the company is available at a price significantly below its intrinsic value.
  • Know what you own.
    We research and analyze any contemplated investment thoroughly before making a capital commitment. We fully acknowledge that we are incapable of understanding every business and its prospects. While we constantly seek to expand our knowledge and improve our insights over time, a key component to our success is the ability to stay within our circle of competence in selecting investments for purchase.
  • Do not diversify excessively.
    We believe in concentrating our holdings in a limited number of companies in the belief that we will have a chance at superior results only if we take risks intelligently. Good investment ideas are rare and when we find one, we prefer to make a significant commitment.
  • Invest for the long term.
    Attempting to invest based on predicting short term swings in individual stocks, the overall stock market, changes in interest rates or the future direction of the economy is not likely to produce consistently good results. We focus on the long term economic prospects of our investment holdings, knowing that we can afford to be patient when we own excellent companies. This approach also minimizes the frictional costs of trading and taxes. When we do engage in investment activity with a shorter time horizon, it is based on rational analysis and thoughtful deliberation and not speculative considerations.


Stacey Muirhead is an unconstrained, global, valuation driven investment firm. The investment mandate for the capital entrusted to our care contains few restrictions. This flexibility enables us to allocate capital to any attractive opportunity that presents itself without regard to considerations such as geography, market capitalization, industry sector or capital structure position. We pride ourselves on our independent, fundamental, research driven investment process. Our sole objective in all our investment activity is to generate acceptable real absolute returns over the long term while minimizing the risk of permanent capital loss.

At Stacey Muirhead, we make commitments to a limited number of Long Term Investments. We look for companies with outstanding business economics, that are run by capable and honest managers, and which are available at attractive prices. We describe this concept simply as ”Great Business, Great People, Great Price”. We also allocate capital to Event Driven Investments where we attempt to profit from participation in various announced corporate events. We are always open to considering other one-off investment commitments and look for various ways to mitigate risks for our investors which may involve the purchase and sale of derivative instruments from time to time. Finally, because we are disciplined, we are willing to hold cash and cash equivalents when we are unable to find enough attractive investment opportunities rather than embracing inappropriate risks.

Long Term Investments

In accumulating our long term investments, we are guided by the following criteria:

  • Does it possess outstanding business economics?
    We look for businesses that have a sustainable competitive advantage. Over time we have found that excellent businesses will demonstrate many of the following attributes:
    • High returns on shareholders' equity
    • A strong balance sheet with minimal or no debt
    • Attractive operating and profit margins
    • Dominant position in its industry
    • Significant brand recognition
    • Pricing power for its products
    • Growing revenues and earnings over time
    • Consistent free cash flow generation
  • Does it have honest and capable management?
    Making judgments about the integrity and ability of people is an important and vital component in our approach. We want to align ourselves with principled managers of proven ability who think and act like owners. We have found over time that it pays to invest in companies where the managers have made a significant investment in the company with their own capital on the same basis as us. We look for reasonable compensation practices and managers who are effective at allocating excess capital. We also look for managements that are successful at creating unique purpose driven, performance focused cultures at their companies.
  • Can it be purchased at an attractive price?
    The price you pay matters. Even the world's greatest business is not a good investment if you pay too much. An attractive purchase price creates a margin of safety if a business encounters unexpected difficulty. In theory, the precise value of any business is equal to the net present value of all the cash it will generate for its owners over time. In practice, this value is difficult to calculate with any precision. When making judgments about what price we can pay for a long term investment, we consider the ratio of price to earnings and price to free cash flow. We also compare the earnings yield of a company to that available from investment alternatives such as risk free government or high quality corporate bonds.

In summary, we are looking for a great business, run by great people, that is available at a great price. To be a great business, a company must meet the needs of all its stakeholders including its employees, customers, the communities in which operates as well as its shareholders. We want to be partnered with companies that embrace diversity, inclusiveness, and equality of opportunity; that are good environmental stewards; that act ethically and legally; and that demonstrate appropriate corporate governance. We actively consider these criteria in addition to economic, management and valuation considerations when making long term investment allocations.

We also recognize that a key component to long term investment success is knowing when to sell opportunistically. While we agree with Warren Buffett when he says that his favourite holding period is forever, we understand that there are times when it may be appropriate to sell a long term investment position to maximize our returns. We will normally dispose of a long term investment in the following circumstances:

  • When we deem the market price to be more than its underlying intrinsic value.
  • If we see evidence of factors that are likely to significantly lessen its sustainable competitive advantage.
  • Where we believe that we have been intentionally deceived by company management either through their comments or in the financial statements or other shareholder communications.
  • In circumstances where we have an alternative investment opportunity that we judge to be better than an investment holding we already own and where we do not have excess capital available for deployment.

Event Driven Investments

While our Long Term Investments most often account for the largest portion of the capital we manage for our investors, participation in Event Driven Investments is also an important part of our operations.

Event Driven Investing involves the pursuit of profit from an announced corporate event such as the sale, merger, recapitalization, reorganization, or liquidation of a company. It can also involve spinoffs, asset sales and self-tender offers by a company or other event specific special situations. Financial results from Event Driven Investments usually depend more on a proposed corporate action rather than on overall stock market behaviour. This activity features securities with a timetable where we can predict, within a reasonable probability, when we will get how much and what might prevent that from happening. Essentially, to properly evaluate a potential Event Driven Investment, we must answer four questions as follows:

  • How likely is it that the promised event will indeed occur?
  • How long will our capital be locked up?
  • What chance is there that something still better will transpire? (An example would be the emergence of a competing takeover bid)
  • What will happen if the event does not take place? (Examples would include anti-trust action or financing glitches)

We only participate in Event Driven Investments that have been publicly announced. Also, where possible, we attempt to reduce risk through some sort of hedge. An example of this would occur in the situation where an acquiring company is offering some form of exchange of its shares with a target company. In such a situation, we may sell short the proper ratio of shares to be received from the acquiring company to lock in a spread.

The gross profits from most Event Driven Investments are normally quite small. However, the predictability of the return coupled with a short holding period usually produces acceptable rates of return. In most circumstances, Event Driven Investments typically produce more consistent profits from year to year than our Long Term Investments because the returns are to a large extent irrespective of the course of stock market averages.

Other Commitments

We are willing to consider one-off opportunities that do not neatly fit into our long term or event driven investment categories. Any other commitments that we make will be purchased with a margin of safety and at a discount to intrinsic value on a basis consistent with all our other capital allocation activity. Commitments to high yield and distressed investments are examples of other commitments to which we have historically allocated capital. High yield commitments involve purchasing a security that is meeting its interest or dividend obligations at the time of purchase and is likely to continue to do so with a reasonable probability. Distressed commitments involve the purchase of a security in an issuer that has already defaulted on one or more of its obligations but where we believe that we can earn an attractive return when the issuer reorganizes its affairs by issuing a combination of cash and one or more new securities to replace the defaulted obligation.

We are also attentive to ways that may mitigate risks to the capital we manage for our investors in a measured, thoughtful, and cost effective fashion. We actively consider all viable methods to reduce the risks associated with adverse movements in foreign exchange values, equity prices, interest rates and any other risks that can be identified. This may include the purchase or sale of various derivative instruments from time to time.

Cash and Cash Equivalents

While cash is our least preferred option for allocating capital in most circumstances, from time to time we find ourselves with more capital than good ideas. Rather than being undisciplined by deploying our capital into opportunities that we would consider to be of inferior quality or with unfavourable risk versus reward characteristics, we will hold such excess capital in cash and cash equivalents while we continue to search for superior return opportunities into which to allocate capital. When holding such investments, our overriding concern is to both minimize interest rate risk and credit risk to the greatest extent possible.

Some Final Thoughts

We have many years of experience in applying this investment philosophy for our investors. We focus on the investment process and not the outcome, knowing that proper execution of this approach will lead to satisfactory results over time. We are enthusiastic and excited by the challenge of researching and selecting investments. We maintain a healthy dose of skepticism and remain flexible enough to change our minds if circumstances change. We are committed to learning and getting better and are always looking for ways to improve our investment skills over time. We set incredibly high standards for ourselves and are never totally satisfied with our results. We owe our investors nothing less.

“An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return.  Operations not meeting these requirements are speculative.”

Benjamin Graham


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