Value Equity Strategy

Philosophy

Perhaps the leading indicator of how successful an investment will be is the price at which it was acquired. A fundamental tenet  of value investing is that an investment’s market value will often deviate from its intrinsic value. MCM’s Value Equity Strategy seeks to identify investments with underappreciated value.

Process

The Mitchell Capital value investing strategy looks to make investments in businesses well below their intrinsic values in situations where we have a clear differentiated view from that market. We spend an extensive amount of time evaluating downside risks and place a heavy emphasis on capital preservation.

As we scan the universe of publicly traded equities, we find that the best opportunities for the value strategy typically exhibit characteristics matching one of these two scenarios:

  • We look for businesses in industries that are out of favor and carry valuations reflecting low
    multiples of free cash flow. These opportunities typically hide out in neglected areas of the
    market. We look to pair an attractive valuation with a strong management team or a catalyst that will spur a turnaround, unlocking value for shareholders.
  • We look to identify great businesses with exceptional management where we can be a minority partner for years to come. Companies with these excellent business models are rarely offered at valuations which seem attractive. When we get these opportunities, we tend to act quickly and establish a position which benefits our clients for years.

We invest in all market cap sizes as this allows us to take advantage of inefficiencies across the full
market. Given our high convictions, we typically run a concentrated portfolio that is more heavily
weighted to those companies identified as having larger upside.

We complement our intensive use of fundamental analysis by implementing technical analysis to
optimize our entry and exit points. Because market conditions are constantly changing and companies will fall in and out of favor, we monitor holdings on a daily basis in effort to preempt any weakness in the portfolio.

Team

Jonn Wullschleger, CFA

Rob Day

Miles Green, CFA

Grant LacKamp, CAIA

Other Equity Strategies

Fixed Income Strategies

Value Equity Strategy: December 31, 2023

Top Ten Holdings

PositionAllocation %
JPMORGAN CHASE & CO.6.1
BERKSHIRE HATHAWAY INC-CL B5.9
TREX COMPANY5.0
OCCIDENTAL PETROLEUM CORP4.9
VISTRA CORP4.7
UNITEDHEALTH GROUP INC3.9
EMCOR GROUP INC3.8
O’REILLY AUTOMOTIVE INC3.6
CINEMARK HOLDINGS INC3.4
TARGET CORP3.2

‏‏The information above is intended solely to provide insight into how the manager analyzes securities, and are not a recommendation for any particular security or strategy. There is no assurance securities will remain in the portfolio or will be profitable. This is a list of top ten holdings based on a percent of total and is not a full list of securities.

Strategy Characteristics

CharacteristicPortfolio
Forward Price to Earnings (P/E) Ratio20.6x
Dividend Yield1.2%
Free Cash Flow Yield4.5%
Net Debt to EBITDA0.8x
Median Market Cap ($Billion)57.9

Strategy Weightings

SectorPortfolio %
Industrials18.7
Financials18.3
Health Care16.1
Information Technology8.0
Consumer Staples7.8
Energy7.6
Consumer Discretionary6.7
Utilities4.8
Cash4.3
Communication Services3.5
Real Estate2.2
Materials2.0

About Mitchell Capital Management

Mitchell Capital Management (MCM) was founded in 1987 and is an SEC Registered Investment Advisor. The firm manages portfolios and provides investment solutions for an array of investors nationwide, including individuals, foundations, union pension plans, retirement plans, endowments and associations. MCM has always been employee owned and intends to stay that way. Our fiduciary culture means our clients are the first priority in each decision we make.

Disclosure: https://mitchcap1.wpengine.com/disclosure/