David Marcus and his team employ a deep-value, opportunistic investment approach. They look for special situations around the globe and will opportunistically invest in companies that trade at steep discounts to their intrinsic values and where catalysts (e.g., management changes, asset sales, spin-offs, mergers, acquisitions, liquidations, shareholder activism, etc.) exist to unlock value for shareholders. This special-situations approach often leads Marcus to complex, under-researched and misunderstood areas of the market. On an exceptional basis, Marcus will also invest in post-distressed situations and merger arbitrage.

Ideas are generated through a number of different avenues. Over the years Marcus has built a strong network of relationships with families and individuals that control business, management teams, regional bankers and brokers, and other institutional investors. He leverages this network for new ideas and to cross-check data points. Marcus also screens for companies that may be undergoing strategic change by performing key word searches for phrases like “spin-offs,” “restructurings,” “management changes,” “mergers and acquisitions,” etc.

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Herro employs Harris' value investment philosophy and process to manage his portion of the fund's assets. This investment philosophy is based upon the belief that, over time, a company's stock price converges with the company's intrinsic or true business value. By "true business value," Harris means an estimate of the price a knowledgeable buyer would pay to acquire the entire business. In making its investment decisions, Harris uses a "bottom-up" approach focused on individual companies, rather than focusing on specific economic factors or specific industries.

The chief consideration in the selection of stocks is the size of the discount of a company's stock price compared to the company's perceived true business value.

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Little and the portfolio management team believe a company that can improve and/or sustain its profitability at a relatively high level can compound returns at an attractive rate. At the same time, they believe in buying such companies trading at discounts relative to their profitability prospects.

Generally, Lazard categorizes any stock that is bought into one or more of the following three categories:

• Compounders: These are companies that the team think can sustain relatively high levels of profitability and that company management may enhance shareholder returns through share buybacks and dividend payments. Lazard will purchase these companies if they believe they can compound total return, i.e., earnings growth, dividends, and share buy backs, at a relatively high rate over the long term and if they are reasonably priced in relation to their profitability prospects.

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The investment team approaches equity investment from the perspective of a fractional owner of an underlying business. Consequently, the focus is on the long‐term growth prospects for the business. They believe that each business has an intrinsic value based on its future ability to generate positive cash returns. They therefore structure the research to identify enduring business models that have the capacity to generate sustainable cash returns above their cost of capital.

They believe that the value of compounding high returns on capital over long time periods is often underestimated by the market. Also they believe that a portfolio of growing companies with the potential to create value, and which trade at a discount to their intrinsic value, will outperform across market cycles. They seek to identify and hold stocks with these characteristics regardless of their sector or region. This approach confers on the portfolio a style that is neither wholly “growth” nor wholly “value,” but “growth at a reasonable price.”

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Read about our due diligence on Paolini and Beneche

Walden believes that a bottom-up approach to investing in undervalued securities will generate above-average returns with below-market risk. Thornburg's idea of value centers on their assessment of the intrinsic worth of an investment. The goal is to uncover promising companies with sound business fundamentals at a time when their intrinsic value is not fully recognized by the marketplace.

The Thornburg team's initial search for investment ideas involves the use of quantitative screens as well as other sources. Starting with the international equity universe, the team screens Thornburg's databases for companies that appear attractive across a number of value parameters. The team looks for securities that have low price-to-earnings, low price-to-cash flow, and low price-to-book ratios. Companies ranging from small-cap to large-cap are considered. Additionally, screens are employed in order to identify stocks where business prospects may be improving. The typical screen generates a list exceeding 50 stocks from which only a few may be selected for further research.
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