Our Investment Approach
Portfolio management is both art and science. As value-oriented, long-term investors, we believe the discipline calls for fundamental research, thorough accounting-oriented financial analysis, and the exercise of sound judgment. To that end, we feel it is important that our Portfolio Managers have research backgrounds and devote substantial amounts of time to personally generating and examining investment ideas.
While each First Manhattan Portfolio Manager is empowered to make his or her own decisions about how to invest clients’ capital, there are certain investing principles we share. We seek to:
- Practice transparency and accountability. We believe that it’s important to know exactly what’s in your portfolio and why it’s there. We primarily invest in publicly traded companies that we can analyze thoroughly. We can explain to any client why we have bought a particular stock and why we continue to hold it.
- Look for unrealized value. As Portfolio Managers, we seek to find and invest in undervalued businesses at attractive prices. These companies are often trading at a “discount” to their intrinsic value due to temporary issues that lead to a market overreaction.
- Align with the exceptional. We do not aim to replicate the broader market. Instead, we seek to own a select group of companies with proven track records of shareholder value creation.
- Ensure that intensive and thorough research drives our decision-making. Above all, preserving client capital is our number-one priority. That is why we take a decidedly in-depth approach when considering any new investment, emphasizing a detailed understanding of the company’s fundamental business, financial prospects, and management quality. To gather information, we often spend weeks visiting a company’s facilities, meeting with senior management, and speaking to their customers. We seek companies that generate strong cash flow, have a responsible level of debt (relative to their industry), and have managements that deploy capital in a shareholder-friendly way.
- Strongly believe in the power of tax-efficient, lower friction compounding. We strive to minimize changes in a portfolio in order to limit capital gains taxes for our taxable clients. To that end, we look to invest in companies with strong and understandable underlying businesses, leading competitive positioning, and long runways for future growth. We tend to own these companies for an extended period of time, enabling our clients to reap the benefits of compounding value of their accounts over a long period.