Thursday, June 2, 2011

Overview of Investment Approach

My approach is bottom-up, value oriented, fundamental and research-driven that is focused on debt and equity investing.  My belief is that my “main street” location encourages independent thought that sets me apart from the crowd on Wall Street.

The strategy is to utilize and/or perform in-depth fundamental investment research  to assess the current and possible future value of public company debt and equity.  The focus is identifying undervalued and overvalued securities over an investment horizon that is generally a year or longer.  In situations where investee companies have demonstrated the ability to create or increase positive intrinsic value over extended periods of time, I may hold equity positions for multiple years. I utilize a bottom-up approach and one that emphasizes security selection in an effort to produce absolute returns. I seek to identify and invest in companies with longer-term secular growth characteristics and may also take positions in cyclical businesses, M&A arbitrage transactions, recapitalization's, spin-offs and selected distressed securities in an effort to reduce the overall risk of the portfolio and covariance between individual portfolio positions. 

I  focus on investing in mid-cap and large-cap U.S. equity.  I also invest in small-cap U.S. equity in select situations.  I seek to identify and invest in companies where a perceived possible significant price to future value gap is believed to exist.  A key objective is to identify and take concentrated positions in situations where I believe above average returns can be obtained over an extended period of time.  Initial positions in public company equity are often established when individual company news is bad or other negative events have taken place that have reduced forward expectations to the point where a future positive price to value gap is perceived.  I also look for opportunities to take equity positions in companies that are out of favor with Wall Street where I believe significant risk adjusted return possibilities can materialize over our investment horizon. 

A bottom-up approach is utilized that is focused on analyzing numerous potential investment opportunities-positions on an ongoing basis in order to identify a select number of mispriced securities that can provide potential future favorable returns. Although I monitor overall economic and market conditions on an ongoing basis, I generally do not focus on forecasting the overall direction of the economy or markets. Historically, I have utilized periods of significant negative market and/or individual stock price volatility to establish positions in individual securities that meet longer-term valuation targets and overall investment criteria.

On a select basis I may take short positions.  The overall portfolio approach is designed to reduce market correlation and produce absolute attractive returns in a variety of market conditions and economic cycles.  My portfolio generally consists of 20 positions or less with select unique positions with the most favorable risk/return and volatility characteristics potentially being sized at 5% to 10% of the overall portfolio.

I have researched and invested in a variety of market caps and companies included in the finance, gaming, industrial, lodging, medical device, real estate, retail, technology and pharma industries, among others.  I have also invested in various commodities including oil, natural gas and timber.  I seek favorable risk adjusted returns in these areas when perceived opportunities exist for standalone returns.  I have also utilized commodity positions for overall portfolio hedging purposes. 

I have invested in a variety of fixed income oriented securities including convertible and high yield debt, MLP’s, mortgage securities and REIT’s, among others.  I invest in select fixed income security categories when perceived favorable risk adjusted return opportunities can be identified.  My portfolio strategy also includes holding cash that can be utilized to take positions in securities with identified longer-term significant value to price gaps that are typically created by near-term significant downward market or stock-bond price volatility.

I utilize self generated proprietary company and industry research along with select debt and equity research of others.  Research techniques also consist of maintaining and/or monitoring company models, participating in company conference calls and interviewing company management teams when necessary.  Additional techniques include monitoring sell side assumptions, company and industry news flow and regulatory filings, among others.  

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