Philosophy | Process | Performance
Philosophy
- Every industry goes through a life cycle: Recovery, High Profitability, Competition, & Underinvestment.
- Identifying industries in the recovery and high profitability stages generally leads to companies with improving stock prices.
- Avoiding industries in the competitive and underinvestment stages lessens downside risk.
- Stock selection is key to achieving superior performance.
Life Cycle Symptoms
Recovery
Fundamentals
- Lead times / orders up
- Volume pipeline trends
- ROIC bottoming
Valuation
- Price / normalized EPS
- EV/EBITDA
- Private market value
Psychology
- Wall Street skepticism
- Dwelling on past results
- Waiting for evidence
Buy/Sell Discipline
- Buy: prospects not reflected
- Sell: fundamentals deteriorate
High Profitability
Fundamentals
- Expanding margins
- Rising estimates
- Pricing flexibility
Valuation
- Price/Earnings
- Peak earnings power
- DCF models
Psychology
- Wall Street upgrades
- Raising price targets
- Extrapolation of future
Buy/Sell Discipline
- Buy: competitive niche
- Sell: reaches price target
- Sell: fundamentals deteriorate
Competition
Fundamentals
- Rising DSOs
- Lack of price / margins
- Capacity growth
Valuation
- EV/EBITDA
- Peer comparisons
- Private market value
Psychology
- M&A/IPO activity
- Wall Street darling
- New marketing initiatives
Buy/Sell Discipline
- Buy: competitive niche
- Sell: reaches price target
- Sell: fundamentals deteriorate
Underinvestment
Fundamentals
- Capacity shrinking
- Restructuring
- Failing margins
Valuation
- Price / tangible book
- Asset breakup value
- Installed base
Psychology
- No Wall Street interest
- Limited trading volume
- "It's cheap"
Buy/Sell Discipline
- Buy / Sell Discipline
- Buy: none
- Sell: none
(Rollover slices to view lifecycle details)
Experienced Portfolio Management Team
Portfolio managers average 17 years of investment management experience
Prior experience managing mid cap assets in excess of $2 billion
Performance Incentive Plan
Aligns managers’ and clients’ interests to reward long-term performance
Matthew D’Attilio, CFA
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William C. Gray, CFA
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