There are a couple of simple rules that Tim Samway sticks to when it comes to long-term investing.
The managing director of Hyperion Asset Management specifically looks for companies that can produce five years of revenue growth, have grown their return of equity above 15 per cent, and are trading with interest cover of more than four times.
"Plenty of companies can achieve top-line growth for a year but it takes a lot more to do it over five years," he said.
After a year, competitors usually rush in to the market and the businesses that survive that competitive threat are the companies that are using intellectual capital effectively or are particularly focused on the consumer, he believes.
Mr Samway says Hyperion is happy to hold as few as 20 stocks in its global fund as long as the companies it does invest in meet the fund's long-term, low-risk investment criteria.
"We are willing to exclude whole areas where we think that there could be high risk," he said, citing developing markets as an area Hyperion is avoiding in its quest to protect clients from permanent capital loss.
These markets typically have weaker accounting standards, lower IP rights, higher corruption and lower levels of natural justice, he said.
"We are patient long-term investors," Mr Samway said. "We bought Facebook in the $US30s and Amazon in the $US300s."
Facebook is now trading at $US175 a share while Amazon is at $US1162 a share in New York.
Facebook is one of Hyperion's bigger portfolio holdings, he said. "We are looking five to 10 years forward with a business like that."
The social media company is building penetration worldwide and there's a gap between the length of time that people look at Facebook and its advertising revenue, Mr Samway said.
He likened the present situation with Facebook to that of the early stages of development of Australian property websites such as REA and Domain when "people were looking online but the advertising revenue wasn't matching that".
"I think that Australian investors should be thinking about the shift from traditional media to online and digital, the shift from traditional retailer to e-commerce, the developing middle class, increased global travel and true global luxury."
Cloud-based products are another area investors should consider, he said, to benefit from a shift from cash to electronic payments.
He's avoiding Australian banks and has been for quite some time.
"We think all the risks to the sector are on the downside," he said, giving the prospect of rising interest rates, the risk of mortgage failure and higher capital requirements as examples of those risks.
"They are also highly leveraged businesses that are more exposed to a market downturn." Mr Samway said Australia is in a flat economic environment with years of slow growth ahead, which he said isn't conducive to recreating the high-credit-growth environment that boosted the banking sector in the 2000s.
"There are some terrific long-term investments that we think are a good alternative to the banks."
While avoiding short-termism is one crucial rule in Hyperion's investment philosophy, the other is learning to avoid "noise".
The fund manager is based in Brisbane. "Some of the best investors in the world aren't in the cities," Mr Samway said. "Sitting quietly at the desk and sifting through information is what really counts."
Though Hyperion's long-term focus means that it's prepared to be patient, companies shouldn't take support for granted.
"Short-term decisions are a way to drive us off your share register. We're not interested in high gearing."
While he doesn't follow market movements closely, he does look for opportunities to increase existing positions.
"Markets are often effective with pricing in the issues of the day but it's a short-term view. A weak share price is often just an opportunity. We make money for clients if the share price goes down before it goes up," he said.
Hyperion's Australian growth companies fund is up 4.93 per cent over six months and 10.06 per cent over a year. Its Small Growth Companies Fund is up 3.31 per cent over six months and 5.74 per cent over a year, according to Morningstar data.