Our principles
1. Shareholders are partners. We view the company as a means to an end, allowing individual shareholders to own assets which are rare and unusual investments that are not generally available to the public.
2. We are in this together. All controlling managers own and will keep James Monroe Capital stock. “We sleep in the bed we make.”
3. Our businesses must generate exceptional profits. We will weed out “opportunistic” situations, distressed deals, and unusual bargains. To do this, we end up making a lot of offers to companies and individuals which are rejected… but due to the law of large numbers, “even a blind squirrel finds a nut once in a while.” If we make a hundred acquisition offers, and we only get two deals, but they are violently profitable, then we are very, very happy. We are here to “strike oil,” reinvest, and do it again.
4. Our businesses must have a future. A buggy-whip company might have been a good thing 100 years ago, but we want to make sure it will be making money tomorrow.
5. Our businesses must be safe. A former Indy 500 winner once said, “In order to finish first, one must first finish.”
6. Long term, we want to see our average rate of gain, in intrinsic company value, from a per-share perspective.
7. Accounting consequences will not influence our operating and capital-allocating decisions. A $10 earning that is non-reportable is better than a $5 reportable earning.
8. We expose our equity to very minimal debt, and only take on debt when it comes to highly leveraging new acquisitions where there is very little risk on our part—and that debt is one of two types: short term debt which is paid off very quickly (such as arbitrage financing), or long term fixed rate debt which provides cash flow from an investment which grows in value much faster than the interest rate being paid.
9. Despite the fact that we insist on buying everything at the “opportunistic” bargain price, we will not diversify by acquiring businesses at regular prices that ignore the long-term financial consequences to our shareholders. We are here to “strike oil”, not to earn a weak return. We believe that over-diversification waters-down profits.
10. We will not sell our companies. We plan to buy into excellent companies at bargain prices, and keep them for long-term profits.
11. We will only issue stock when we receive MORE in business value than what we give. This applies to everything, including mergers, public stock offerings, stock-for-debt swaps, stock options,… everything. Any stock issuance is going to result in a gain for all shareholders by way of a bigger, better James Monroe Capital.
12. We will be open in our reporting to you, explaining the good, the bad, and the ugly when it comes to evaluating acquisition value. If we were you, that is what we would want. We owe it to you to be transparent about what we are doing.
13. Despite the fact that we are open, we only communicate through our website and through press releases. Competitors and others who seek inside information have shaped our “no comment” policy. Competitors and others who seek inside information will be politely referred to our website, especially since we like to see our managers working, not stopping to chat.
14. To the extent possible, we would like each James Monroe Capital shareholder to record a gain or loss in market value during a period of ownership that is proportional to the gain or loss in per-share intrinsic value recorded by the company during that holding period. For this to occur, intrinsic value and the market price of a James Monroe Capital share would need to remain constant, and by our preferences at 1-to-1. So we would like to see James Monroe Capital’s stock price at a FAIR level, not a HIGH or LOW level. Obviously, we can’t control James Monroe Capital’s price. But by our policies and communications, we can encourage informed, rational behavior by owners that, in turn, will tend to produce a stock price that is also rational. Whether the price is fair, high, or low, we believe that our business ethics will help James Monroe Capital enjoy the best prospect of attracting long-term investors who seek to profit from the progress of the company rather than from the investment mistakes of their partners.
