Investment Philosophy

We focus our investments in a select number of extraordinary businesses. The companies we invest in meet standards that we not only apply to the business, but also to the management teams in charge. We look for robust capital allocation discipline and a high level of skill in operations. As a firm we ignore short term market fluctuations and believe in the power of patient, strategic and long-term investing. We are long-term investors in a short-term world.

Investment Criteria

Successful companies have great products, benefit from secular growth and have durable competitive advantages.

When evaluating potential investments, we prioritize companies that meet all our criteria. The companies we invest in typically benefit from innovation and change, offer products and services that are easy to understand, have a strong value proposition for its customers, are unlikely to be commoditized, offer a large opportunity for long-term growth and have a strong company culture. Overall these competitive advantages should enable the business to compound over a long period of time.

Management and people are the key drivers of successful businesses.

At the heart of any successful business is exceptional management. When evaluating potential investments, we prioritize companies with leadership teams that possess the following traits: exceptional business skill, a clear long-term vision for the future of the business, significant ownership stake, a shareholder friendly compensation structure, a deep understanding of Economic Value Added and most importantly unquestionable integrity.

The greatest risk comes from paying prices that are too high. Purchase price matters.

Our valuation approach focuses on what we believe a company can earn in 5 to 10 years. We prioritize high levels of free cash flow relative to the share price. We focus on companies with financials that are easy to understand, allowing us to make informed decisions. In our pursuit, we actively identify businesses with the potential to generate substantial economic value added and future free cash flow. We view these indicators as reliable predictors of enduring success.

Long-Term Investment Themes

At Hudson Square Investment Management, our investment approach is firmly rooted in a long-term perspective. We believe in investing in trends that will shape the future economy and society over the coming decades. Our strategy is built around several key themes that we believe will drive substantial growth and transformation:

Robotics and Automation: The integration of AI and robotics into everyday life is not just a trend but a transformative force. Industries across the spectrum, from logistics to agriculture, are seeing a surge in automation. We are particularly interested in companies that are at the forefront of this revolution, offering innovative solutions that will redefine how work is performed and value is created.

Sports Content and Entertainment: As automation and robotics advance, the traditional workday will shorten, leading to increased demand for leisure activities. Sports content, in particular, is expected to see significant growth as people seek more entertainment options. This sector's potential is underscored by the continuous investment in sports technology, fan engagement innovations, and the rising popularity of currently less popular sports which are attracting increasing attention from investors.

Personalized Living Spaces: The desire for personalized, comfortable living spaces continues to drive the real estate market. We anticipate a continued focus on creating homes that cater to individual preferences, with an increasing emphasis on technology integration, sustainability, and innovative use of space. The evolution of real estate investment is closely tied to technological advancements, offering new opportunities in areas like energy efficiency and flexible workspaces.

The Gig Economy: The gig economy is revolutionizing the traditional employment model, empowering individuals to become their own bosses and build businesses on flexible platforms. From ride-sharing and delivery services to freelance marketplaces and digital content creation, these platforms enable unprecedented levels of autonomy and entrepreneurship. This trend is creating a new class of workers who prioritize flexibility and control over their work-life balance. As these platforms continue to grow and diversify, we see significant investment opportunities in the companies that are driving this shift towards a more independent and dynamic workforce. The gig economy is not just a temporary trend; it represents a fundamental change in how people work and earn, one that will have long-lasting implications for the labor market and economic structure.

Longevity, Wellness, and High-Quality Foods: As people strive to extend their lives and enhance their quality of life, there will be growing demand for products and services related to wellness, longevity, and nutrition. This trend is expected to foster innovation in the food industry, healthcare, and wellness technologies, driving long-term growth.

Disruption of Legacy Industries: The replacement of outdated systems with innovative, consumer-centric solutions is a persistent trend. Companies that can improve consumer experiences, much like Amazon did with retail, are poised to disrupt industries such as insurance and finance.

Real Estate: The real estate sector remains part of our investment strategy and a cornerstone of the global economy. As the population continues to grow, the demand for housing and related infrastructure will remain strong. However, we are also mindful of the potential for disruption in this sector, particularly through technological innovations that could reshape traditional real estate practices.

Fintech and Payment Processing: The financial services industry is undergoing rapid transformation, with fintech companies leading the charge. Innovations in payment processing are creating more efficient and user-friendly financial experiences. We see significant potential in this space as traditional banks face increasing competition from agile, technology-driven firms.

Space Exploration: Space exploration is no longer the domain of governments alone. The proliferation of satellites, advances in space technology, and the potential for commercial space ventures offer a new frontier for long-term growth.

Innovation in Defense: Modern warfare is evolving, with technology playing a critical role. The ongoing conflict in Ukraine has highlighted the importance of new and advanced technologies in military strategy. We believe that continued investment in defense innovation will be essential, offering substantial opportunities as countries modernize their military capabilities.

By focusing on these themes, Hudson Square Investment Management is positioning itself to capitalize on the transformative changes that will define the future, ensuring long-term growth and value creation for our clients.