Philosophy and Process

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Philosophy and Process

Our Investment Philosophy

Our investment process is classic value. Put another way, we seek to buy good businesses at low prices, focusing exclusively on companies that are underperforming their historically demonstrated earnings power.

The value philosophy is predicated on the belief that most investors do not want to invest in businesses that are experiencing problems or are otherwise out of favor; a lack of near-term earnings visibility leads investors to significantly undervalue companies that are experiencing some form of distress, as most investors prefer to wait until a company’s current problems are resolved, or to invest in less controversial growth oriented companies.

By our definition, value investing requires two key elements: exposure to companies before the stock price reflects signs of obvious business improvement and significant patience. Only by purchasing in advance of clear evidence of positive momentum along with a willingness to hold for the long term, can an investor be assured of paying very low prices and therefore maximize the opportunity for superior long-term returns. We are unwavering in our discipline and commitment to deep value through all market conditions. 

Our Investment Process

Our portfolio construction begins with valuation. We focus on companies that are underperforming their historically demonstrated earnings power and apply intensive fundamental research to these companies in an effort to determine whether the problems that caused the earnings shortfall are temporary or permanent. We look for the following five criteria in each position we take:

  • Low price relative to the company’s normal earnings power

  • Current earnings that are (typically) below historic norms

  • Management that has a viable strategy for earnings recovery

  • The business has a history of earning attractive long-term returns

  • There is tangible downside protection

We believe a concentrated portfolio exclusively focused on companies such as these should generate meaningful excess returns for long-term investors.