Tsai Capital Corporation

590 Madison Avenue, 21st Floor New York, NY 10022
Telephone: Facsimile:	212 521 4251 212 898 0381

Our Philosophy

We believe that the future is uncertain and therefore so are profit forecasts. An investment must be justified primarily upon a demonstrated history of profitability and secondly upon the potential for future growth. We don't want to overpay for growth that may not materialize or that is already reflected in the market value of a company.

While the future is uncertain, we believe that there are specific fundamental characteristics that often result in above average growth. We therefore favor investing in companies with:

• high rates of return on equity and capital
• strong free cash flow
• a sustainable franchise
• dominant market share
• above average profit margins

Tsai Capital does not forecast the direction of the stock market or the economy because we believe that short-term market gyrations do not affect the long-term prospects of an investment.

Long-term ownership
We invest for the long-term and view each investment as a minority ownership interest in a business.

While many investment managers buy and sell investments on a regular basis, we tend to hold our investments for a number of years. The benefits of compounding capital over a long period of time and in a tax-deferred manner can be substantial.

Investment Alternatives
If we are unable to find high-quality businesses at value prices, we will temporarily hold cash (money market securities) and/or U.S. Government obligations.

Selling Discipline
We recognize that the fundamentals behind a company’s success can change and that business values are inherently dynamic. Disciplined selling is therefore critical.

We sell an investment when:

•	a security becomes clearly overvalued
•	the business fundamentals deteriorate or are expected to deteriorate
•	the sale and reinvestment of sale proceeds are estimated to result in a substantially greater future value
•	our analysis was flawed