OUR INVESTMENT PHILOSOPHY
We follow a classic value investment philosophy, based on a bottom-up research process.
“Put simply, value investing is trying to buy good businesses when they go on sale. Most investors hate uncertainty and shy away from problems they believe are permanent. We use detailed analysis to overcome that tendency. ”
Rich Pzena
Founder
Value Investing – It’s What We Do
We seek to buy good businesses at low prices, focusing exclusively on companies that are underperforming their historically demonstrated earnings power. We perform fundamental research on these companies to determine whether the problems that caused the earnings shortfall are temporary or permanent. Emotional investors tend to overreact to near-term events, leading them to undervalue distressed companies, but we see undervaluation as opportunity. We separate fact from emotion through a research-intensive investment approach applied within a consistent framework.
STEADFAST COMMITMENT TO VALUE
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. Since our firm’s inception in 1995, we have remained resolute value investors, unwavering throughout all market conditions, to maximize the opportunity for superior long-term returns.
NORMALIZED EARNINGS ESTIMATES
We develop normalized earnings estimates – what we expect a company to earn across a business cycle – starting with historical company and industry data and incorporating inputs from our research findings. We believe using price-to-normalized earnings in our valuations provides a more comprehensive picture of a company’s long-term earnings potential versus other valuation metrics.
FUNDAMENTAL RESEARCH PROCESS
We follow a collaborative, consensus-oriented approach to making investment decisions, such that all members of our investment team play a role in the process.
We focus on the most undervalued segment of the investment universe, as identified using our proprietary screening tool, based on price-to-normalized earnings.
Analysts perform an initial review of assigned companies to determine the reasons for the stock price decline and if we believe they are temporary.
If portfolio managers think it is warranted, analysts perform an in-depth research project on the company, including financial analysis, field work, meeting with management, and speaking with an external analyst who is bearish on the stock.
Through team discussion and debate, we develop a refined estimate of normalized earnings and determine if the company should be included in our portfolios.
GET IN TOUCH
Our team would be happy to discuss investment solutions or to promptly respond to your client or corporate inquiries.
