Investment Strategy

We utilize a bottom-up investment strategy and focus on market-leading companies with significant recurring revenue, solid operating margins, moderate leverage and strong returns on capital.

We assess valuation through a variety of methods including, but not limited to, discount to market multiples (free cash flow, price/earnings, enterprise value/EBITDA, etc.), a "sum of the parts" valuation and/or a private market valuation based on comparable transactions.

We complete a discounted cash flow (DCF) model for each subject company with conservative operating assumptions and discount rates. We use these analyses to arrive at an estimate of fair market value and establish a buy price that represents a 30%-40% discount to fair market value. We believe this methodology ensures that a margin of safety exists prior to purchase.

We offer two investment strategies for our clients.  The Bernzott U.S. Small Cap Value strategy consists of companies with market capitalizations at purchase of $250 million - $5 billion.  Our Bernzott U.S. All Cap Value strategy includes companies with market capitalizations  from  $250 million at purchase and up, but will not be constrained by a capitalization ceiling.  Both strategies will generally hold 25 - 40 positions. 

We construct portfolios  without regard to the sector weighting of its benchmarks. We believe a concentrated approach is superior, because it allows the firm's best ideas to have a significant impact on returns and, in our opinion, that will ultimately lead to market outperformance. We seek long-term investment returns and resist short-term trends and momentum.

Strategy Fact Sheet:
U.S. Small Cap Value

Fact Sheet Archive