Approaching Value Investing From A Credit Perspective
Prospector approaches value investing from a credit perspective, with an emphasis on value based principles and bottom up fundamental analysis. Our in-house, deep dive research is key to our approach, focusing on regulatory and statutory statements when available, in addition to GAAP. We look at balance sheets first, cash flow second, and income statements last, paying special attention to marked to market balance sheets and private market value for capital intensive businesses. It’s all about the approach, and at Prospector our time-tested, consistent approach is evident in our results.
Risk management is thoroughly embedded throughout the Prospector investment process. We operate within a long established asset allocation comfort range, and don’t over bet. The investment team views equities through a credit lens, and approaches risk management from that same credit perspective. In our view, one of the most important pieces of risk management is maintaining a proper alignment of interests, and at Prospector we’ve been dedicated to that alignment for over 20 years.
Always consider what can go wrong when seeking risk adjusted returns
Less financially leveraged companies
Strong underlying franchise and asset values
Receives less focus by management and is harder to manipulate
Reliable place to uncover financial improvement or decay
Free cash flow yield focus results in:
Better business models
Lower reliance on capital markets
Asset prices set by 3rd party private market transactions
Acknowledges difference between GAAP accounting and intrinsic value
Avoid group think and the Wall Street middle man
Sector-focused analysts perform proprietary analysis
Detailed meetings with company managements that support original insights