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Approach
Why Value?
At SKBA, we look past popular market perceptions to take aim at attractive opportunities others fail to identify. Our independent and disciplined investment approach helps clients achieve their investment goals even in the most challenging market environments.
We believe discipline and patience combined with a consistent process and a critical eye towards the market helps us identify market inefficiencies. Financial markets often present buyers with opportunities to purchase out-of-favor securities when expectations are low. Identifying these securities, SKBA formulates an investment hypothesis by understanding the capital allocation process of a company, its future opportunities, and competitive positioning.
The concept of mean reversion is an essential framework for why all value styles produce excess returns. Indeed, the simple assumption that stock market valuations and interest rates will eventually revert back to some long-term norm or mean is at the heart of most perceptions about future investment returns. But this often leads one to arrive at incorrect conclusions about both the path of markets and their eventual valuation levels.
Value investors periodically must be able to go against consensus thinking. Shifts in investor sentiment about a stock's underlying fundamentals from extreme optimism to extreme pessimism repeatedly create significant mean-reversion opportunities. It is at these points in time that being a contrarian at the right time can allow value investors to benefit from shifts in investor sentiment about a stock's underlying fundamentals from extreme optimism to extreme pessimism repeatedly create significant mean-reversion opportunities.
Process
People
We established the firm predicated on our core values and principles that have served our clients well over time. We foster a collaborative, team-oriented culture that values employee interaction where professionals proactively share knowledge and expertise. We conduct ourselves with the highest degree of integrity, establish mentoring relationships, provide development opportunities, and strongly encourage individuals to think independently. The result is an experienced staff of professionals as well as organizational stability.
Our policies and principles are designed to maintain continuity in our key people and investment style. We achieve continuity by prudent succession planning and ownership distribution.
Philosophy
SKBA believes stock prices routinely overshoot true changes in the underlying fundamentals of a company, both on the upside and downside, due to excessive pessimism or exuberant optimism. The firm believes insightful proprietary research conducted within a consistent process provides the best opportunity for investment returns and that inexpensive securities will outperform the overall market in the long-run.
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Challenge conventional thinking to discover real value.
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Develop unique perspectives by looking beyond reported earnings.
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Purchase inexpensive stocks to increase upside potential and decrease downside risk.
For over 30 years, one of our core philosophies has been to avoid, “the permanent loss of capital”. We seek to provide clients with actively managed portfolios that outperform our benchmarks, while exhibiting less risk, over a full market cycle. In fact, our logo is a proof statement of this commitment representing a fountain of ideas in the northwest quadrant and our compass pointing in the same direction.
Process
SKBA's investment process has been in place since the founding of the firm. Our process integrates fundamental bottom-up research with our economic perspectives. Each step, from idea generation to risk management, is designed with the aim to deliver attractive investment results while minimizing the risk of permanent loss of capital.
We are committed to active management and seek to construct high conviction portfolios that are broadly diversified by sector and industry. Our portfolios will typically reflect high “active share” in its securities holdings and may establish portfolio weights that are different than the benchmark in both individual stocks and in sector weights.
Typically our value based portfolios have exhibited low downside market capture, low standard deviation and higher risk adjusted returns over full market cycles. Overall this has resulted in declining less than the market during corrections or down cycles, but also participating in the majority of the market’s upside returns.
Our investment process has been implemented for over 30 years with a true consensus-building decision-making process, as opposed to a “star” or committee based process. The goal is to foster open dialogue and debate among the firm’s investment professionals to lead to better outcomes for our strategies and our clients.
There is no single individual with absolute decision making authority. Clients are invested in the investment process, rather than with any single individual. This has allowed our investment philosophy and process to be consistently applied for over three decades.