Investment Research and Selection

We are only interested in securities trading at a large discount to their intrinsic value.

Common equity
The shares of companies trading at a large variance to intrinsic value are of interest. Large discounts to asset value, low multiples to free cash flow, are examples of this type of investment. The presence of a catalyst toward the realization of intrinsic value makes it more interesting.

For example, over the years we have found, from time to time, companies trading at a large discount to their net cash and/or marketable securities sometimes providing us with a business or other assets for free.

The shares of companies trading significantly in excess of intrinsic value in the presence of a catalyst and especially in the presence of questionable accounting or questionable corporate governance are of interest as short sale candidates.

Fixed Income and Preferred Shares
The bonds or preferred shares of companies trading at a substantial discount to their contractual /intrinsic value with the capacity (through asset revaluation and/or cash generation) to return their contractual/intrinsic value are of interest.

The bonds or preferred shares of companies trading about contractual/intrinsic value in the presence of a catalyst such as a ratings downgrade, covenant violation, etc are of interest as short sale candidates.

Other securities
Securities to which value based principles can be applied are of potential interest when their price deviates significantly from their intrinsic value. This includes:

  • option contracts that are overpriced or too cheap
  • merger arbitrage opportunities offering a low risk, high return yield to closing
  • convertible securities that might be hedged for attractive cash flow and incremental return possibilities
  • discrepancies between two parts of a capital structure
  • discrepancies between the valuation of two related entities
  • risk insurance that can be bought cheaply

Finally, we are open to new ideas that take advantage of current or possible market dislocations and can be bought at a substantial discount.

Note to Research Providers
If you want to set yourself up to send us your research electronically, please contact Dianne Leckie to obtain the proper email address.

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