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SG Value Partners is Value Investing
"Distressed Value" investors acquire securities from companies that are either already in default or likely have to file for bankruptcy soon. A good legal understanding of bankruptcy proceedings, which vary widely from country to country, is crucial for the success of distressed value investors. For this purpose, the correct valuation of the assets in bankruptcy status is important.
At the time, Graham focused on companies that could be liquidated at a higher value than the purchase price of the security in question, even in the event of bankruptcy. To do so, he looked for companies whose conservatively valued assets minus all liabilities were worth significantly more than the company's valuation by the market. In doing so, he searched for companies that had a margin of safety in the balance sheet.
The shares we select are typically well-established firms with a long track record that have been temporarily overlooked or misunderstood by the market, or heavily punished for a problem. Our philosophy is based on the idea that companies whose businesses face temporary setbacks can be acquired at an attractive price based on their normalized earnings power. The key to our purchase and sale decisions is the margin of safety, i.e. the difference between the market price and the intrinsic value of a stock.
GARP is an investment strategy that combines elements of growth investing with value investing. Investors are looking for companies that can show above-average profit growth. At the same time, companies with too high a valuation are excluded. This leads to the selection of companies with strong (albeit more expensive) assets, which tend to have lower price sensitivity, especially in cyclical downturns.
A key pillar of this investment strategy is projected capital gains as a result of a company's growth. The analysis focuses primarily on the income statement (P&L). The concept of the margin of safety usually plays a secondary role.
We invest independently of the benchmark and do not make relative investment decisions when we implement new investment ideas through our bottom-up-oriented stock selection. That's why we like to call our work a "craft." Our strategy resembles an "anti-momentum strategy".
Our investment method is based on the perspective of an entrepreneur. The central tasks include the analysis and selection of companies on a purely individual security basis. Purchase and sale decisions are made solely on the basis of the business risk and the valuation of the respective company. In our analysis, we limit ourselves to companies and industries that we believe to be able to assess adequately.
We make countercyclical investment decisions in favour of unpopular areas of the stock market and invest in the long term with an investment horizon of more than five years. Problematic corporate situations and unjustified valuation discounts are therefore a good entry point for us. Our investment philosophy is characterized by the fact that our portfolios usually do not contain the well-known stocks which are part of the major indices, but the unpopular or unfashionable companies that are being neglected by other investors.
We consider the disciplined and consistent implementation of the strategy to be one of the great strengths of our philosophy. Deep value is the foundation on which we can generate solid returns in the long term. However, our clients need to be aware that such an investment style can lead to significant underperformance in the short term compared to the broad market. Patience and a calm mindset are therefore an absolute prerequisite for potential savers who are contemplating to invest with us.