Additional Thoughts on Idiosyncratic Companies

8 May 2019 | by Todd Wenning, CFA

In late April, I wrote another article for British investing publication, Investors Chronicle. This time around, I focused on what we call idiosyncratic companies – businesses that don’t compare well to others and are hard to categorize.

We love these sort of companies because they are often misunderstood and/or misvalued by the market. While we at Ensemble value companies based on expected cash flows, growth, and returns on invested capital, many other market participants rely on rules of thumb or relative valuation to “price” companies. These shorthand approaches have their place, but are less useful when a company has a differentiated business model.

In the article, I highlight two of our current holdings that we consider to be idiosyncratic: Ferrari and First Republic. We believe both of these companies are sector hybrids of sorts – Ferrari is part consumer luxury and part automotive company; First Republic is part high-end consumer services and part bank.

Please enjoy the article and, as always, feel free to CONTACT US with questions and comments.

CLICK HERE FOR THE ARTICLE, “BREAKING THE MOULD”

As of the date of the post, clients invested in Ensemble Capital Management’s core equity strategy own shares of Ferrari (RACE) and First Republic (FRC). These companies represent only a percentage of the full strategy. As a result of client-specific circumstances, individual clients may hold positions that are not part of Ensemble Capital’s core equity strategy. Ensemble is a fully discretionary advisor and may exit a portfolio position at any time without notice, in its own discretion.

While we do not accept public comments on this blog for compliance reasons, we encourage readers to contact us with their thoughts.

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