Seeks a concentrated portfolio of undervalued companies with improving fundamentals. Special emphasis is placed on identifying catalysts that can accelerate earnings growth. The team believes that over time, the market rewards these types of companies. The Team’s goal is to generate competitive returns over a three- to five-year time horizon while maintaining low turnover.
- Cohesive team with a long track record working together
- Buy and hold philosophy with an emphasis on stock picking - names are added to the portfolio after exhaustive bottom-up fundamental research; we buy companies, not characteristics, and we hold names for three years on average, as catalysts for earning acceleration play out
- Concentrated portfolio - with 40 to 50 names in the portfolio the team has a comprehensive understanding of changes and activity occurring at companies and within industries
- Excellent long term historical track record
Investment ProcessFundamental research is key to our investment approach; identifying opportunities for earnings acceleration is essential
- Screens over 1,500 companies
- Market caps in the range of companies in the Russell 2000 Value Index at the time of purchase
- Research includes financial analysis, management track record, valuation assessment, analysis of new products/product enhancements, and peer market review
- Focus on the early identification of catalysts that can accelerate the rate of earnings growth is the cornerstone of our process
- Drivers of earnings acceleration can include management changes, restructurings, business cycle changes and market activity
- Generally 40 to 50 names
- Top ten positions typically accounting for <40% of the portfolio.
- Position size is limited to 5% at the time of purchase; position sizes are trimmed back when they reach 7%
- Risk analysis focuses on market risk, company risk, and portfolio risk
- Three criteria guide the sell process: changes in the company fundamentals that alter the original investment thesis; full valuation; and on-going research that reveals a better investment opportunity