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“Pessimism creates out-of-favor stocks. We believe out-of-favor stocks are our best source of opportunity. They can be out-of-favor growth stocks or out-of-favor value stocks — we are agnostic as we use both as a source of alpha for our large-cap core product.”

— Guy Pope, Senior Portfolio Manager

Investment Approach

The Value and Restructuring strategy aims to capture the revaluation in a stock that often occurs as a company undergoes a successful restructuring and transforms its business. The strategy looks to provide a broadly diversified portfolio of companies with low valuations that demonstrate significant potential for fundamental improvement. It focuses on catalysts such as business restructurings, new management and/or industry consolidation that can help companies realize that potential.

Distinguishing Features

  • Strategy developed by lead porfolio manager in 1993
  • Distinct value strategy focused on company restructurings and/or industry consolidation
  • In-depth bottom-up stock selection creates a broadly diversified portfolio with exposure to multi-capitalization ranges that will consider interantional business
  • Long-term investment horizon designed to provide low turnover and opportunities for value companies to potentially become growth companies through the successful execution of their business plan

Investment Process

Identify investment ideas and valuation analysis

The investment team narrows the universe through a focused set of criteria, where stocks are likely to be undervalued with unrecognized potential to generate improved fundamentals

  • Restructuring catalyst: Announced business restructuring, new management, consolidating or changing industries potentially create margin expansion and improving returns on capital
  • Traditional valuation metrics: Low P/E, P/CF, underappreciated assets or new low list
In-depth fundamental research and buy decisions

A bottom-up due diligence process is used to evaluate each company, leading to buy decisions that are conviction-based and valuation-driven (typically 20% – 50% discount to the market)

  • Management strength: Strategic vision, experience
  • Earnings drivers: Capital allocation, operating leverage
  • Company issues: Good business qualities, market position
  • Industry analysis: Industry growth, barriers to entry
Portfolio construction and sell discipline

Diversification across industries, capitalization and domicile, as well as across restructuring themes, should help the portfolio to perform well in different market environments

  • 60 – 70 companies, not beholden to benchmark weightings
  • Long term investment horizon lowers turnover to approximately 10% – 20% annually
  • Sell decision candidates: valuation premium reached, completed restructuring, fundamental disappointment or position size reaches 10%