VIC — Alexander Roepers

Upside from large global value stocks from the Value Investing Congress

By xiexgp@gmail.com, September 16, 2013

Alex Roepers speaks at most of the Value Investing Congress events, and he has often shared excellent ideas of (mostly) larger industrial stocks which can benefit from what he calls “constructive shareholder activism” … he’s planning to share five new investment ideas, but started with “insights from 25 years.”

He is a concentrated investor, typically with a half dozen favorite stocks in the US, Europe and Japan, and they are disciplined about both buying inexpensively and selling.

The Cambrian Fund is their big one, with 6-7 US stocks, no leverage.

Insights from his history as a concentrated value investor:

Focus on a carefully defined universe. Stay with what you know, stay with what you can analyze and INVEST … do not speculate. Be consistent, disciplined, persistent, and patient. Do your homework as if you are buying the whole business Read/Call/Visit, crunch numbers and kick tires. Be stingy, don’t be greedy — wait for the price, and then scale out at pre-determined valuations. Don’t stay in and get drunk on your own success. Trade around the position, make sure it’s liquid and avoid proxy battles or board seats. Don’t use leverage in your portfolio, or buy levered companies. Buy companies that don’t worry about failing or going bankrupt. Be honest and transparent with your investors — for me, I guess that would be being honest and transparent with you. Which, hopefully, I’m doing — even if I’m never going to be an activist shareholder or get the attention of the management team of any company I buy.

They review many things with cash flow-generating companies to see how they can change and unlock value through investor messaging, executive compensation, use of capital, corporate structure, restructuring, etc.

Most of the companies are name brand or substantial industrial companies that sound familiar to investors. The five they shared last year were Energizer, Rockwood Holdings, Clariant, FLSmidth, Joy Global, they’ve scaled out at 20-40% gains on most of them. Rockwood and Clariant are still holdings — they’ve scaled out some but still own them. ROC has actively spun out some assets to unlock value.

Five new ideas:

Baker Hughes (BHI) — third largest after HAL and SLB. Problems have been execution and problems in the pressure pumping business (we’ve seen that too, with CJES and CYSVF). He sees support around $40-45, price target of $71. He seems improved utilization ...

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