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.
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.