Our objective – We seek to maximize total after-tax return through capital appreciation, and income from dividends and interest, consistent with reasonable risk.
We seek to maximize total after-tax return through capital appreciation, and income from dividends and interest, consistent with reasonable risk.
We invest in undervalued assets wherever they may be found. Typically, this results in holding a portfolio of companies we believe are materially undervalued by the market. Bonds may be included in the portfolio if they are a good investment.
We start with a bottom-up scan of domestic companies, typically looking at most U.S. companies at least four times per year. We add to that an understanding of the sector dynamics in which companies are operating, an assessment of the business cycle, and a review of macroeconomic conditions.
Our primary screening metric is return on shareholder equity (ROE). We are looking for companies with good returns that can be purchased cheaply, or for companies with improving returns that have not yet been recognized by the market.
We don’t believe that a holding period of “forever” is appropriate in all cases, but are comfortable holding companies as long as they continue to meet expectations.
We define investment risk as the probability of losing purchasing power over long periods of time, which is quite different from Wall Street’s definition of price volatility in very short periods of time. Taxes, inflation, and spending will ALL impact the purchasing power of your assets.
Muhlenkamp & Company’s goals are as follows:
- Preserve capital.
- Achieve a reasonable total return on invested capital without subjecting the portfolio to unacceptable business or market risks. We define “reasonable return” as 4-6% annually, over inflation, over long periods of time. See Why the Market Went Down.
We utilize political, economic, fundamental, and technical input as we seek to accomplish our investment goals. To the extent available, we acquire data and its interpretation from outside sources including economists, banks, broker-dealers, research organizations, business publications, and government sources. We do not attempt to duplicate good research available from outside sources. We do monitor, however, the data we receive to ensure its accuracy, and insist on understanding the basis for conflicting opinions and their implications for investment decisions.
We concentrate our proprietary research efforts in those areas where good data or a diversity of knowledgeable opinions are not yet available.
With this input, we believe that we are in a position to make sound, informed judgments concerning business fundamentals, security valuations, and market timing.