Value Opportunities Strategy

We provide separate account portfolio management with an active small/mid-cap value investment strategy. We believe that with diligent research & a high degree of selectivity, a focused portfolio of undervalued, small to mid-cap companies has the potential to provide superior risk-adjusted returns over time compared to other investment strategies. Our selection universe includes small-cap companies that have viable businesses & the capability to grow into mid-cap, either organically or by acquisitions & mid to large-cap companies that have temporarily fallen out of favor. We also invest in small to mid-cap divestitures from larger companies that may be underappreciated by the market if they meet our selection criteria.

Our investment process includes:

  • Quantitative Screening for Value Opportunities
  • Qualitative Research
  • Valuation Assessment & Technical Analysis
  • Security Selection
  • Portfolio Construction
  • Ongoing Review of Portfolio Holdings & Search for New Opportunities

Our screening, research & valuation assessment process has evolved with over two decades of investment experience. Our process is designed to identify undervalued investment opportunities that offer attractive risk-adjusted appreciation potential with a margin of safety supported by valuable assets net of debt. Portfolios are constructed based on our specific selection criteria & mostly consist of weightings in the 3 to 10% range depending on the time period held & extent to which a position has appreciated in relation to the portfolio. Higher weighted positions have typically been in the strategy for longer time periods & are most often the best performers. New positions are typically initiated in the 3 to 5% weighting range & sometimes purchased at varied time & price intervals.

In many cases, value investment opportunities take discipline and patience to develop. As a result, our portfolio turnover rate has historically been relatively low in the 15 to 25% range. Investments are made when we can identify potential catalysts that we believe could meaningfully increase shareholder value over our expected time horizon, which is typically 3 to 5 years. We invest in event-driven special situations on a select basis which have included restructurings & spin-offs both before & after they occur. We've had success as well investing in companies that eventually became acquisition targets. Since the inception of our strategy, positions that have been acquired at substantial premiums or received take-over offers include:

El Paso, Motorola Mobility, Sprint, D.E. Master Blenders, Hillshire Brands,TECO Energy, Diamond Foods, Questar, Dreamworks Animation, TiVo, Mead Johnson Nutrition & Scripps Networks (pending).

Positions are sold if we achieve our objectives, or if the investment no longer meets our selection criteria. We typically rotate out of companies when they achieve premium or large-cap valuations to free up capital for new opportunities based on market conditions.

 

We invest in undervalued companies that have the ability to generate cash flow with valuable assets net of debt service, which can provide a measure of downside risk protection.