DISCOVERING VALUE
SKBA brings the investor a strategic array of value-based investment solutions, backed by perspective, process, and performance. Our objective is to outperform our benchmarks while maintaining appropriate risk exposure.
Value Opportunity , a value-oriented investment philosophy, seeks to achieve long-term capital appreciation by investing in a diversified portfolio of undervalued equity securities. The strategy uses a company’s relative market capitalization to revenues (“RMCR”) to ascertain a historical valuation framework for investment.
The research process attempts to discover stock prices lower than company's terminal net worth. Focusing on growing earning power, cash flows and sustainable business models are crucial in the construction of the portfolio.
OUR APPROACH
We begin with a universe of securities with a minimum market capitalization generally greater than $1 billion. Our initial valuation filter evaluates the Relative Market Capitalization to Revenues (“RMCR”) of each company in relation to our universe of the 1000 largest companies and to that company’s history. Companies that pass the RMCR valuation filter provide us with a diverse group of investment ideas from which to begin our research process.
We then determine a company’s earnings power -- its long-term ability to generate profit for reinvestment or distribution to shareholders. Our research process determines if an investment offers sufficient return potential. We focus on factors such as balance sheet & income statement improvement, competitive position, industry prospects and management’s alignment with shareholders’ interests.
SELL DISCIPLINE
We will sell a security when:
- Stock reaches valuation extreme
- We expect or observe a long-term deterioration of fundamentals
- We identify more compelling investment ideas
- Company exhibits a lack of shareholder orientation
- The stock weighting exceeds 5% of portfolio.
PORTFOLIO CONSTRUCTION
Our objective is to construct a portfolio of 40-60 stocks diversified by sector to control risk. Our bottom up approach to stock selection highlights industries and sectors with the most attractive values. Sector weights are reviewed when they reach the greater of 15% of the portfolio or two times the Russell 1000 Value Index.
STRATEGY TEAM MEMBERS
Andrew W. Bischel, MBA, CFA
Kenneth J. Kaplan, MBA, CFA
Josh J. Rothé, MBA
Matthew D. Zuck, MBA, CFA