- Chip Rewey
Carpe Diem, Patiently
One of the keys to long-term investment success is to be a patient buyer and commit capital only with a compelling opportunity. Over our 30+ years of investment experience, we have deeply analyzed thousands of companies, and many of these on multiple occasions. While our smid-cap value portfolio will hold only 15-25 actively researched and high conviction positions, we evaluate a significantly greater number of companies each year as we analyze new investment ideas and the close peers of the companies we own, as part of our continuing due diligence efforts.
Most of the companies that we analyze fail our investment process by not meeting all three tenets of our investment philosophy: a strong balance sheet, the ability to grow and a significant discount to our Assessed Fair Value (AFV) price target. However, some companies pass our investment hurdles and are not added to our portfolio, but instead are placed on our “Bull-Pen” list, a formal list of companies that we continue to monitor for potential near-term inclusion into our portfolio. Companies are added to our Bull-Pen list for a variety of reasons, including near-term valuation moves, near-term events that bear monitoring, or for being too similar to an existing position already held in the portfolio.
Our Bull-Pen list is a powerful tool that allows us to be patient, high conviction investors when an opportunity arises, i.e. carpe diem, patiently. Having a stable of fully-researched potential investment ideas allows us to take advantage of market volatility and investor uncertainty post a news announcement, an earnings announcement or even a large price move based on seemingly no news whatsoever. Additionally, it gives us the confidence to quickly purchase a position if an identified risk to our investment case is removed, for example post a deleveraging event, or the favorable resolution of potential litigation. Our Bull-Pen list provides us with the ability to act quickly with clarity and conviction when the opportunity arises.