U.S. Value Equity Team
Capital Stewardship Focus
We believe that management teams that are good stewards of capital and employ it efficiently will grow their business over time and create shareholder value.
WHAT WE BELIEVE
We believe that successful companies possess superior capital stewardship, characterized by strong cash flow generation, improving or sustainable return on invested capital (ROIC), and shareholder-value focused management teams. Investing in these companies may provide downside protection.
Proprietary company-specific modeling and valuation work:
- Helps gauge management’s historical record of capital stewardship
- Highlights future opportunities for management to create shareholder value
- Helps us develop strict price targets where we seek to buy stocks trading at 70% of our one-year price target
And our sector neutral approach allows us to focus on investing in the best stocks within each sector.
WHY THIS MATTERS
Small-cap companies typically have an insatiable appetite to get bigger. There are a number of ways these companies can grow and many of these options are not shareholder friendly. The most straightforward example is a management team that makes a series of acquisitions and overpays for the acquired companies. In the end, the company is now larger, but was this the most efficient way for the company to employ its capital? Would the company have been better off returning this capital to shareholders or paying down debt?
We strive to invest in companies that are focused on growing the right way and are generally growing their free cash flow and return on invested capital. We believe management teams that are good stewards of capital and employ it efficiently will grow their business over time and create shareholder value. If management struggles to find a good use for the company’s excess capital, they are generally better off being disciplined until the right opportunity comes around or returning the excess capital to shareholders so they can employ it as they see fit.
Our active ownership culture creates long-term client relationships by helping you achieve successful investment outcomes. Contact us to learn how we can partner with you.