We follow a disciplined investment process whose foundation is built on rigorous in-house, original, bottom-up, fundamental research.
We have a narrow focus in our search for ideas. Some of the methods we use to find ideas include: using proprietary news searches to help ensure we are “early identifiers” of companies undergoing strategic change; tapping into our global network of relationships with individuals who control businesses, CEOs, board members, institutional investors and foreign regional investment firms; using existing data sources and proprietary methods to locate public companies with otherwise “hard-to-find” characteristics in our focus areas (e.g. family control, cross ownership, etc.); scouring foreign regional investment firm equity guides and special situations reports for catalyst-driven opportunities; meeting with global company management teams independently and at broker-sponsored events in the U.S. and abroad to provide a rich source of investment ideas; being voracious consumers of information from financial publications, trade publications, regulatory filings, and daily news flows; and monitoring and revisiting companies we have previously researched.
After our investment professionals determine an idea is worthy of further consideration, we then perform detailed original fact-based research to determine whether a prospective investment possesses the risk-reward characteristics we require.
We build detailed, bottom-up, fundamental financial models that are used as a basis for all parts of the research process, including but not limited to our valuation, scenario analysis, catalyst assessment, and risk management.
We validate business fundamentals and determine an estimate of a company’s intrinsic value. We conduct detailed financial statement and business segment analysis, and we meet and/or speak with management teams, large shareholders (in some cases), competitors and suppliers.
We perform a detailed risk assessment to evaluate risks that could adversely impact a potential investment. Such risks may be related to stretched balance sheets, unexpected currency movements, geo-political uncertainty, and management execution.
In assessing a company’s business, risks, management and catalysts, we seek to leverage our team’s operating experience and global network. These relationships have proven to be invaluable in helping fully vet certain ideas.
Members of our investment team share a common desk enabling them to converse about portfolio holdings and new opportunities during the ongoing research and analysis phase. Investment opportunities are also discussed and debated among the entire investment team at weekly meetings. Formal portfolio reviews are conducted and research summaries are also presented at these meetings.
After a potential investment is discussed amongst the team, the portfolio manager will either (1) direct the relevant research analyst to conduct more analysis or (2) make a decision on whether or not to make an investment.
If a buy decision is made, the portfolio manager determines near term and target sizes for the position. We limit position sizing based on our risk/reward analysis and liquidity considerations.
We typically construct global portfolios of 30 to 40 positions, European portfolios of 18 to 25 positions, and international portfolios of 20 to 30 positions.
We typically maintain modest cash positions and also hedge currency exposures tied to our portfolio holdings (unless otherwise mandated by client investment guidelines). Our preference is not to sell an existing position to purchase a new one, and so we keep fresh investment capital at the ready, if and when a new idea is approved for investment.
We utilize short selling, options and derivatives to both help manage risk and best seize securities mispricing (unless otherwise mandated by client investment guidelines).
The investment team continuously monitors their respective assigned positions to review and reassess catalysts, any new business developments and risks, and margins of safety.
In order to help such review, the team remains continuously engaged with portfolio company management. We almost always take the approach of collaborative engagement with management, rather than taking an aggressive activist stance.
We generally start to sell a position when it reaches approximately 85% of our intrinsic value estimate; when required by our portfolio construction mandate; or when, in our opinion, better opportunities exist elsewhere. We generally sell an entire position when it has reached our target price; when we have concluded that our original thesis was incorrect; when we see erosion in company fundamentals; when new risks have been introduced that significantly impact our thesis or valuation; or when, in our opinion, better opportunities exist elsewhere.