A Different Approach

Sasco Capital’s portfolios are characterized by high active share and are typically quite different from both their value benchmarks and other active value strategies. This is due to our unique approach to sourcing new ideas.

In short, we focus on identifying potential transformations, not just attractive valuations.

While most value managers will initially screen stocks based on low price-to-book ratios or other valuation metrics, we don’t start our search with price parameters. Instead, our discovery process starts by identifying financial underachievers: underperforming, diversified companies where low-return business segments are obscuring the profitability and earnings power of a better performing segment – a “hidden jewel” – elsewhere in the company.

We then assess the opportunity for smart and motivated management teams to bring this hidden jewel to the forefront, usually through a transformative action such as a spin off, divestiture, asset sale or restructuring. Before investing in the company, we meet with senior management to evaluate their ability – and willingness – to execute the types of transformative changes that can unlock a hidden jewel’s full potential.

Over longer time horizons, we believe these transformative changes can lead to higher stock prices as the market comes to appreciate the full earnings power of the newly structured or newly focused company.

To learn more about our portfolio construction, click here.

A New Approach

We then assess the opportunity for smart and motivated management teams to bring this hidden jewel to the forefront, usually through a transformative action such as a spin off, divestiture, asset sale or restructuring. Before investing in the company, we meet with senior management to evaluate their ability – and willingness – to execute the types of transformative changes that can unlock a hidden jewel’s full potential. Over longer time horizons, we believe these transformative changes can lead to higher stock prices as the market comes to appreciate the full earnings power of the newly structured or newly focused company.

“We don’t start off looking for just statistically cheap stocks … but underperforming companies with a hidden jewel and a management team motivated to restructure the company and unlock higher earnings power.”