Our conviction, patience, value philosophy and aligned interests translate into true active management focused on long-term results. Our process incorporates creative scrutiny of the market, fundamental business analysis, the projection of multiple future scenarios, and collegial debate.
We are contrarians. We spend time assessing where future earnings might be in three to five years…not in three to five quarters.
Different. The very best investment opportunities often go overlooked by the majority of investors. That’s why we look at companies that other investors may think have poor prospects. Market participants tend to move as a herd, but we look purposefully in a different direction—for great ideas that have yet to be recognized.
High Conviction. Each Poplar Forest portfolio is generally concentrated in 25 to 40 companies that have been carefully selected by our investment team. Our rigorous and deliberative research process leads to conviction in the long-term potential of our investments.
Aligned Interests. Poplar Forest is an employee-owned company, and every investment team member is invested in one or more of the Poplar Forest Funds. We believe in our process and in the investments we hold for our clients.
Rigorous business evaluation with multiple viewpoints drives our investment decisions.
Disciplined. Regardless of public perceptions, we keep our eyes fixed on the fundamental value of each current or potential investment. Among other factors, our team evaluates normalized earnings, free cash flow, and organic growth prospects, using not only a base case forecast, but also upside and downside scenarios.
Patient. It may take time for public opinion to migrate in our direction, but we strive to make the rewards worth the wait. We make investments with a multi-year investment horizon, and our portfolio turnover rate is consistent with a long-term orientation. In an environment in which many market participants focus on daily or quarterly returns, we believe our patience differentiates us from the pack.
Resolute. We strive to separate fear and uncertainty from decision-making. Our mindset helps us remain firmly focused on the thoughtful evaluation of companies for the long-term—no matter what the short-term perception of the market may be. We believe that one of our most important responsibilities is to help investors remain calm and to take the emotion out of investing.
Poplar Forest’s investment process is consistent and repeatable.
Idea Generation. The Poplar Forest investment team evaluates company-specific, not sector specific opportunities using bottom-up fundamental analysis. Analysts evaluate normalized earnings, free cash flow, and organic growth prospects. Once an assessment of fair value is achieved, we compare it to the current market price. Throughout the process, multiple viewpoints intensify the rigor of the evaluation. Team members first work independently to analyze each potential investment. Then afterward, the team comes together to discuss and debate the conclusions.
Reality Checks. Our portfolio managers and analysts perform a “clean piece of paper review” every six months for every holding. The review starts with our original thesis—why did we buy this stock—the target price, and the price of the S&P 500 Index. The strategy is designed to force us to identify errors and sell when appropriate.
Value Consciousness. The price paid for an investment has a significant impact on its return. We believe that buying undervalued companies offers potential for outperformance. We care more about price than how a company is perceived. If our analysis indicates that a major discrepancy exists between price and our assessment of fair value, we are comfortable investing in unpopular or misunderstood companies.