North American Value Opportunities: Identifying the Right Time to Buy Into Fat Pitches for Maximum Upside

Wall Street Transcript

67 WALL STREET, New York - February 19, 2013 - The Wall Street Transcript has just published its Investing Strategies Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with Portfolio Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Value Investing - Long-Term Investing - Longer-Term Investing - All-Cap Growth Investing - Bottom-up Investing - Global Investing - Emerging Market Growth Dynamics - High Quality Companies - Investment Strategies - Investing in Emerging Markets

Companies include: Caterpillar Inc. (CAT), Tempur Pedic International Inc (TPX), Sealy Corp. (ZZ) and many more.

In the following excerpt from the Investing Strategies Report, an expert Portfolo Manager discusses his portfolio-construction strategy and investment philosophy.

TWST: What does "value investing" mean to you?

Mr. McCloskey: Value investing means looking for obvious opportunities. One of the most difficult things to do as an investor is to have the patience to wait for what Buffett refers to as the "fat pitch." Every day in the market, our firm sees securities that are only modestly mispriced. And we think that having a wide margin of safety is key, so it's just looking for great businesses, businesses that you can predict - and there aren't a lot of them. There are a lot of the businesses out there that we're not interested in investing in because we can't predict their future.

I've been asked to appear on television call-in shows and have always declined, for fear that for 90% of the calls that would come in, I would say that we wouldn't buy that company for this reason or that. To us, value investing is first and foremost identifying those great businesses, businesses with very high returns on invested capital that tend to generate tremendous free cash flow, and then just waiting until they're cheap.

The problem with value investing is that those opportunities don't come along very often. You don't get that opportunity until something has gone wrong with the business or when something about the business has fundamentally changed, and that's when we roll up our sleeves to see if the challenges are merely a temporary phenomenon - and if they are, that's when the opportunity presents itself. So to us value investing is all about hard work, looking for those unique opportunities and just maintaining the discipline to buy them when the opportunity does come along.

TWST: How do you separate those best ideas from others that might fit the mold?

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.

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