Who We Are
Sasco Capital, Inc. is an independent investment adviser incorporated in Connecticut. We manage Mid, Small and SMid Cap contrarian, value equity portfolios for corporate pension and profit-sharing funds, state and local government funds, endowments, foundations and high net worth individuals. The firm is 100% employee owned.
Our investment approach is contrarian with a value discipline and a focus on turnarounds and restructurings. We search for out of favor companies with “hidden jewels” that are selling at large discounts to their future “restructured earnings power”. Our discipline leads us to research and value individual business segments where there is an opportunity for smart and motivated management teams to fix, restructure and grow the company to unleash higher earnings that ultimately lead to higher stock prices. The investment approach is strictly “hands-on” stock-picking based on extensive fundamental analysis and personal meetings with senior management.
Sasco Capital’s proprietary research process identifies companies considered financial underachievers: underperforming, diversified companies where low-return divisions are masking the profitability of good businesses elsewhere in the company (the “hidden jewels”). Extensive fundamental analysis of segment values and restructuring opportunities, combined with meetings with senior management, enable us to value the businesses, evaluate management’s ability to execute the required changes, and to project the future earning power of a company. All research, investment decision-making and portfolio construction is done on a team basis by Sasco’s Portfolio Managers and Research Analysts.
We manage concentrated portfolios with a maximum of 35 stocks characterized by a high active ratio. Our investment approach provides for an average holding period of about three years. We remain fully invested at all times. We do not employ options, futures or derivative instruments. Portfolio weightings are determined by relative risk/reward and liquidity measures of individual issues. Weightings of 3 to 5% are deemed appropriate for achieving superior returns.
While it appears to us that the market has rebounded significantly further and dramatically faster than warranted by the outlook for the fundamentals, clearly government stimulus efforts have driven both sentiment and fund flows, and could continue to do so. Moreover, with the ten-year Treasury yield trading south of 70 basis points, bullish investors can legitimately argue that applying historic “norms” to market valuation multiples is overly punitive, thus “justifying” nearly any market level. Nonetheless, as we sit here today, the shape and timing of the economic rebound remains uncertain, as does the outcome of the November presidential election, thus we are trying to maintain balance in the portfolio, while still being focused on individual company restructurings to unlock higher earnings and stock prices
For now, it seems as though the market has entered a bit of a trading range, as government actions are perceived to have taken the worst-case downside risks off the table, while at the same time, investors have adopted a more sober view of the prospects for a rapid reopening and v-shaped recovery. In turn, investors are once again “playing it safe” in growth and large cap tech. While we won’t try to predict the near-term machinations of the market, or when the Value/Growth cycle may finally turn, what is clear to us is that there are still many opportunities to buy out of favor stocks with significant restructuring and upside potential. Thus, we look forward to benefitting from not only the undervalued names that currently reside in the portfolio, but also from the new restructuring prospects we continue to uncover.