Most of us are familiar with the idiom taken from the old folktale of Chicken Little: “the sky is falling.” This central phrase from the folktale has been adapted for modern times to describe an unreasonable fear—and today is used to describe the irrational behavior driving the current “risk off” market environment. In this quarter’s letter, J. Dale Harvey, Poplar Forest Capital’s Chief Investment Officer, discusses how macroeconomic fears are creating distortions between good business fundamentals and valuation multiples. We believe many of the current overriding fears in the market today are unwarranted, thus creating a great buying opportunity.

"At Poplar Forest, we approach investing the way I shop at Oliver’s – by focusing on what’s on sale. We don’t buy every special (some things are on sale for worrisome reasons), but when we see a good deal on a great stock, we jump on it. I think this bottom up approach is better than preparing a list at home (equivalent to a top-down forecast), then simply buying everything on that list. And can you imagine the index fund approach to grocery shopping – simply buying a little of everything in the store?" - J. Dale Harvey

While it may be difficult to believe after having won three of the last four NBA championships, in the not so distant past, the Golden State Warriors looked like a value investment. At an estimated current market value of $3.1 billion, they are anything but a value investment today, and are certainly a far cry from the $450 million price tag when they were an unloved and underappreciated team just eight years ago. In this month’s quarterly letter, Dale discusses the importance of imagination, conviction and patience in value investing, especially when value investing is out of favor. Just as Joe Lacob and Peter Guber applied these traits when purchasing the downtrodden Warriors in 2010, we continue to apply them every day in our investment process while sticking to our game plan of seeking market-beating, long-term results for our investors.