Deep Value Strategy

A Pure Deep Value Approach to Equities

Why Deep Value Strategy?

Absolute Value Return Focus: A company-specific event, cyclical business occurrence or temporary change in industry dynamics could lead to market dislocations. We invest in out-of-favor securities that are trading at very low valuation levels – whose current market price is significantly undervalued. Investment candidates, at the time of purchase, will have a current market price approximately half of their calculated 3/5 year intrinsic value.

deep-value-strategy-approachPatience and Discipline: We stick to the principles of our systematic investment approach that have been tested through various market cycles. We analyze each company along quantitative and qualitative factors, focusing on the reward/risk assessment for and understanding the Margin of Safety of each investment.

Bottom Up Construction: We build portfolios from the bottom up, weighting securities based on the reward/risk profiles. We believe this allows us to achieve the portfolio best designed for long-term outperformance, as opposed to strategies limited by sector, industry or other restrictions.

Why Now?

Ignore Market Noise: The markets are increasingly focused on short-term movements or “noise”, providing opportunities to investors, like us, focused on long-term value.

Return to Active Management: Investors impatient with passive strategies that consistently underperform are turning to active managers to meet long-term investment objectives. We have a long history of actively managing our strategies, never veering from our approach.

Attractive Portfolio Valuation: Valuation characteristics near all-time absolute lows and historical discount to the overall marketplace. Overall portfolio valuation discount to the market is typically 40-70%.

3Q 2018 Portfolio Snapshot

All data as of 9/30/2018

Portfolio Statistics

Total # Holdings: 48

% in Top 10 Holdings: 43.2%

Active Share: 98.1%

Valuation Characteristics Deep Value S&P 500
Price/Earnings (FY2) 7.5x 16.3x
Price/Book .5x 3.3x
Price/Cash Flow 1.9x 13.4x
Free Cash Flow (FCF) Yield 17.6% 6.6%
Weighted Average Market Capitalization $12.8B $247.5B

Equity Sector Breakdown

  • Deep Value Strategy
  • S&P 500