Fundamental Research
The primary objective of its research is to develop opinions independent of Wall Street and to understand the companies it follows as well as any industry analyst. The firm looks for stocks where it believes the underlying company’s long-term fundamentals will evolve significantly better than the current Wall Street consensus or valuation suggests. This can be a function of greater expectations it has for new products, new markets, new management, restructuring, a structural shift in demand or supply, or other changes in industry dynamics.
The firm’s research involves interacting directly with the companies it is reviewing as well as their competitors, suppliers, and customers.
Long-Term Perspective
PRIMECAP looks for stocks that will outperform the market over a three to five-year horizon. We strive to recognize values early and patiently wait for the market to reach a similar conclusion.
Often, our search begins with companies and industries that are currently out of favor among investors. Consequently, our investment ideas are frequently early. However, conviction derived through our research efforts, gives us the fortitude to stay the course when the near-term fundamentals are challenging if we believe the long-term thesis is intact.
Individual Decision-Making
PRIMECAP shuns “group think” and committees whenever possible and rely on individual decision-making in our investment process. We believe that individuals generate the best investment ideas, not committees.
Recognize Opportunity Early
PRIMECAP believes that successful investments are recognized early at a fair valuation. We strive to identify companies that have the opportunity to evolve in a materially different way than currently expected by the market. With our long-term view, we believe we can achieve long-term success for our clients and mutual fund shareholders.