29. During the current management’s tenure, have there been any decisions (sector, themes, individual positions) that have had a significant impact on performance (either positive or negative)? What factors have been key in building the track record? What have been the biggest mistakes?

Our decision to stick with our valuation model and our discipline in buying good companies at cheap prices has been the key to building our track record. By remaining disciplined in our approach, we tend to move counter to the conventional wisdom; enabling us to buy good companies that no one else wants and helping us to avoid paying too much for good companies when everybody else wants them. For example, coming out of the 1990 recession we were finding good values in financial stocks. It looked to us as though the consumer had enough cars, clothes, and house, but was spending money on financial products; so, we bought title insurance companies, and insurance companies that sold annuities, and brokers, and global banks. Another example of sticking to our discipline came about in the fad markets of 1998-2001. By the end of 1999, our performance lagged most of the indices for 1998 and 1999, and we were criticized (by clients, consultants, analysts, and the media) for not recognizing that it was a new world, a new economy, and for not realizing the old methods of valuing companies didn’t work anymore. We disagreed and published our rationale in Muhlenkamp Memorandums #49-52. The stocks that were posting the best returns were selling at fantasy levels and we could not justify paying current prices for them. We owned companies that were running the businesses as well or better than the highfliers but were selling for one third the multiples. So, we held our course, and were willing to look dumb for two years, but that enabled us to post excellent returns in 2000 and 2001. Most recently, coming out of the 2008 recession we did not think the US was having a normal recovery from a normal recession even though the broad market behaved as though we were. So, we focused on balance sheets and defensive positions in our portfolio. This led to good absolute returns, but relative underperformance. Starting in 2021 our performance has outperformed our benchmarks, relative performance cycles between under and over performance. Fundamentally, our decision is to follow the numbers, stick to our discipline, and constantly check our valuations. If we do this, the numbers will take us to the companies we want to own, and the companies will provide the performance our clients need.