Fortitudine Investments

Fortitudine Vincimus

This document is not to be interpreted as financial advice in any way. Investment Strategy
Fortitudine Investments will adopt a long term investing strategy known to the investment world as, value investing. Value investing is an investment strategy which relies on the analysis of the underlying fundamentals of a business. Some of the worlds most successful investors including, Ben Graham, Charlie Munger, Charles Dodd, Bill Ruane and of course Warren Buffett have used this strategy and adopted the principles of this sound investing practise. The principles that these great investors have used (and there are many) have become the tools, the founding principles and cornerstones of the Fortitudine Investments Portfolio. If a stock is bought in the same way as a whole business was, essentially an analysis of the fundamentals of the underlying business would be undertaken to determine the value at which we are prepared to pay. This is the same principle that is applied to each and every stock that is selected for the Fortitudine Investments portfolio. Investing in undervalued stocks requires analysis of the fundamentals of a business to determine its intrinsic value. In order to value a stock as if it were a whole business it would require an in depth analysis of the following points; Historical earnings data Management Capabilities & Shareholder relations Products & Services Development of Product & Processes Future earnings potential & equity structure for future growth Debt levels

The analysis of the above 6 points will help determine whether a company has the desirable traits to warrant an investment that will bring value to the portfolio and the shareholders of the business. Fortitudine Investments strategy is to purchase stocks or businesses at a discounted price to their intrinsic value. When a stock is purchased at a discounted price from the intrinsic value, this is called a margin of safety. The larger the margin of safety the less risk the investment presents in owning it. The Margin of safety is the difference between the cost base at which the stock or business is bought and the true value or intrinsic value of the stock or business. It must be noted that Value investing is a long term strategy and a value investor does not value stock according to the daily market price quoted on a stock exchange on any given day. The stock market moves up and down for a number of reasons. As the ASX is an order driven market (meaning that stocks can only be bought if there is stock being sold by another party and vice versa) the stock prices can fluctuate quite erratically should there be a large sell or buy order placed in the market. This usually lends itself to; a company announcing profit guidance, profit taking buy traders, short selling as well as many other reasons. Whilst the investment strategy will not involve any foreseen short term trading strategies, short term trading does have its place and its existence can be used to the portfolios advantage. Short term trading increases liquidity in the market which makes it much easier to sell down stock should it be required. Opportunities will also arise to buy undervalued stocks at cheaper prices from dramatic price fluctuations. Be fearful when others are greedy, and be greedy when others are fearful
Warren Buffett

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Fortitudine Investments
Fortitudine Vincimus

In the instance that a stock should advance pass its intrinsic value, it will not be added to the portfolio and if it is already in the portfolio, it will in some cases be sold. Generally stocks or businesses that maintain sound underlying fundamentals will not be sold unless better opportunities exist elsewhere in the market.

Portfolio Diversification
The Fortitudine Investments portfolio does not focus on one particular stock; in turn it does not diversify to the point that there are minimal gains. Diversification is a strategy for the defensive investor and does not allow for substantial gains. A lower number of different stocks selected across different industry sectors in the portfolio are generally more likely to realise extensive gains than that of a mutual fund that can allocate up to 200 stocks in a portfolio. A portfolio that is regularly analysed, which contains great businesses has a greater chance of substantial capital gains and growth as well as possess a safety net, Margin of Safety, to that of a mutual fund which will track the index.

Benchmark
Most Fund Managers create a benchmark for their performance to be measured against. As Fortitudine Investments is a private organisation and does not sell products to retail or institutional investors, or have any mandates to comply with, it is not required to measure its performance against any created benchmark. However, in order to provide some clarity to our performance a benchmark has been created to measure our performance. The benchmark that has been created is to achieve a return of 10% above the S&PASX200 on an annual basis. Whilst a benchmark has been created it is almost certain that this benchmark cannot be guaranteed that this will be achieved every year.

Reinvestment and compounding Interest

To gain the maximum benefit from the investment strategy it is vital for the business to retain as much of the earnings from dividends for a long period of time, at least 5 years minimum. The reason for this is simply, compounding interest. Compounding interest is a powerful yet underutilized phenomenon within the investing world that requires patience, time and rational investing behaviour, hence the aversion to long term value investing. Earnings, or dividend income will be reinvested into the portfolio as the manager sees fit. There is no mandate that stipulates how much of the capital will be invested. The manager of the portfolio will at their discretion decide whether to elect to become a part of any dividend reinvestment plan (DRP) or receive part scrip, part cash. The other option is to receive only cash. Any investment earnings will be reinvested under the strategy that this document refers to, value investing.

Exchanges
New York Stock Exchange (NYSE) Euronext Paris (PAR) Euronext Brussels (BRU) Euronext Amsterdam (AMS) NASDAQ London Stock Exchange (LSE) Toronto Stock Exchange (TSX) TSX Ventures Exchange (TSXV) Hong Kong Stock Exchange (HKEx) Singapore Stock Exchange (SGX)

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Disclaimer
The information contained in this document is provided as information only and does not constitute financial product advice. None of the information provided takes into account the personal objectives, financial situation or needs of the reader. The reader must determine whether the information is appropriate in terms of your particular circumstances. For financial product advice which takes account of your particular objectives, financial situation or needs, you should consider seeking independent financial advice from an Australian Financial Services Licensee. Fortitudine Investments makes no representations about the accuracy or suitability of the information. Without limitation, this extends to any market research or commentary contained in this document. The information is provided "as is" without express or implied warranty. Any person viewing this document must make their own independent enquiries before relying on any information provided in this document. No Offer The information contained in this document is not, and is not intended to be an offer of, or an invitation to purchase or subscribe for, financial products.

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