EQUITIES

The most common question an equity investor is asked is "how are the markets"?  UCP buys companies, not markets.  The reality is that the whilst a market will to some extent dictate the price of a company, rarely will it impact its value or its quality.  Unless we’re buying an Index hugging Exchange Traded Fund, what the market does is as relevant to Urban CAPITAL Private as are the nocturnal predilections of the rare Amazonian Peanut Head Bug.

The harsh reality is that in the end, the direction of a market will have almost no bearing on the success or otherwise of an investment.  If a bomb goes off in Time Square or a commercial airliner is shot down in some far away land, the markets will react....it's what they do when they encounter fear and uncertainty.  The response of a good investor and the only rational response to any market moving event is to question whether a company's financial outlook will be materially and structurally impacted by the event.  Invariably the answer will be NO notwithstanding that its price (not its value) will change, sometimes materially, in response to negative headlines.

At Urban CAPITAL Private, we primarily invest in companies that exhibit the following attributes:

• a genuine competitive moat to prevent rapid disruption from new entrants - if you're not running flat-out in business nowadays, you're standing still or going backwards. A culture of perpetual innovation is the best defence against nimble new entrants who want to eat your lunch for you.

• a sustainable CASH profit: our companies require a history of solid cash returns and a future that's equally bright. We look for profit that translates to cash in the bank. An accounting profit isn't worth dickens if you cant bathe in it, used it with kindling to make a fire, disperse it from your helicopter window or use it as wallpaper in your French Chateau.

• the right price: Urban CAPITAL Private doesn't own literally dozens of high quality companies that exhibit the above criteria. That's not because it did its dough on the Dapto Dogs or because its office is a 50 metre hop to the Men's Gallery. It simply refuses to pay more than it should for a company to generate an appropriate risk adjusted return on its investment. Urban CAPITAL Private recognises that companies with high margins growing at high speed inevitably encounter competitors who want, and often claim, a piece of that action. It's only the truly exceptional that can sustain extraordinary margins and speed over any stretch of time - these are the unicorns.