Investment Philosophy

Steyn Capital believes that capital markets are efficient over the long term. At the same time, though, we recognize that capital markets are inefficient over the short term in certain circumstances. The challenge for investors seeking consistently to outperform a market yardstick lies in the recognition of temporary inefficiencies and/or the circumstances giving rise to such inefficiencies, and the ability to capitalize upon these value dislocations in a timely fashion.

SCM believes that trading values in the long term are determined strictly by fundamental factors, such as the level, growth and prospective use of discretionary cash flows and realizable net asset values which determines a security’s true intrinsic value. In other words, we believe corporate securities represent ownership in or a claim on a business and should not be viewed merely as speculative instruments bought in the hope that another buyer will pay a higher price in the future. Notwithstanding this belief, technical, psychological, and supply/demand factors clearly influence trading values in the short term. Such temporary value dislocations create attractive opportunities for the alert, diligent, and patient investor focused on intrinsic value.

Dislocations between intrinsic and trading values exist in two forms. In the first form, the influences of technical price trends, psychology, and supply/demand cause trading to diverge from intrinsic value. The market temporarily focuses on something other than intrinsic value, and SCM invests in the premise that the market will refocus on fundamentals so that trading value will converge with intrinsic value. In the second form, the market miscalculates intrinsic value due to a lack of either effort or ability. Here, SCM invests on the premise that the market will correct its assessment of intrinsic value and that the trading value will adjust accordingly.

We believe that an investment approach that emphasizes intrinsic value with a high margin of safety will achieve consistent absolute investment returns over the long term and safeguard capital regardless of market conditions.