67 WALL STREET, New York - December 16, 2013 - The Wall Street Transcript has just published its Top Ten Portfolio Manager Interviews of 2013 Report. This special feature contains expert industry commentary through in-depth interviews with award winning Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Top Ten Portfolio Manager Interviews of 2013
Companies include: ConAgra Foods, Inc. (CAG), Teleflex Inc. (TFX), AnnTaylor Stores Corp. (ANN), Thermo Fisher Scientific, Inc. (TMO), Life Technologies Corporation (LIFE)
In the following excerpt from the Top Ten Portfolio Manager Interviews of 2013 Report, a pair of highly experienced and successful money managers discuss their investment methodology and top picks for investors:
TWST: Would you describe your team's investment philosophy and some characteristics you think make it unique?
Mr. Kaplan: We are clearly bottom-up-oriented. We pay careful attention to the macro environment, but our strength is in individual stock selection. We look at many variables when identifying potential investments, but there are six critical investment criteria that we pay the most attention to. Our primary focus is on identifying companies that generate strong and growing free cash flow. We don't just examine the absolute level of cash flow. We're focused on its composition. We seek to determine whether cash flow growth is coming from strong topline results, improvements in working capital, important changes in capital expenditures or depreciation methodology. Free cash flow is the lifeblood of a company. It provides the financial flexibility to pursue bolt-on or strategic acquisitions, dividend payments, dividend initiations, share buybacks or deleveraging.
We also pay very careful attention to valuation, which is a common focus in the investment business. However, we're more interested in forward valuation rather than on valuation based on what has already happened. Our goal is to exploit gaps between market perception and reality by unearthing ideas that trade at a discount to our assessment of fair value. Another core characteristic we look for is some sort of changing internal dynamic, something that in essence will change the configuration of a company.
This might be a change in strategic direction or situations such as the closing of a division or the establishment of new plants or new distribution facilities. For retailers, an example would be committing more square footage towards private-label brands. In short, we ask, has the company taken an action that makes it more profitable and more efficient in the coming years than it is today?
Mr. Howard: Marshall identified free cash flow as the most important factor. An important driver of free cash flow improvement is rising profit margins. Sometimes, this stems from changing internal dynamics, but we also look at companies that can leverage their fixed costs efficiently...
For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
- Basic Materials Industry
- free cash flow
- Life Technologies Corporation