Semper Augustus: Passing The Value Investing Test
November 2, 2017
As a value investor focused on identifying undervalued, high-quality businesses with free cash flow in excess of the cost of capital, Christopher Bloomstran has been tested—early and often.
A major test came in 1998, in the runup to the tech bubble, when he and Partner and Portfolio Manager Chad Christensen launched Semper Augustus Investments Group with a strong conviction in that value investing philosophy.
“It was a brutal period for stock pickers of the value orientation…not dissimilar to what we’ve had now,” said Bloomstran, the firm’s president and cio.
But through the burst of the tech bubble, the Great Recession and the ongoing headwinds against active management, the firm’s approach to valuing companies and the overall market has paid off for investors taking a long-term view.
“Every time you have had a major market downturn, we have managed it well,” he said.
The firm’s performance history backs that up. From 2000 through 2002, when the Standard & Poor’s 500 Index posted negative returns, the strategy topped the benchmark by actually making money when the index fell by half, beating the index by more than 25% in both 2000 and 2001 and by 11% in 2002. In 2008, as the effects of the recession began to ripple through the economy, the strategy outperformed the index by 18.2%, gross of fees.
The firm’s portfolio typically holds no more than 30 companies and aims to provide a dual margin of safety between business quality and price.
“The vast majority of publicly traded companies are not good businesses,” he said.
Taking a long-term approach to investing in the good businesses provides the firm a unique take on the market.
“Once we buy a business at an attractive earnings yield, assuming the profitability comes through over time, ultimately our returns are going to revert to the underlying return on capital on business,” said Bloomstran, who noted the portfolio has 13% average annual turnover. “An advantage of what we do—and I think this is in contrast to what many think of the active versus passive debate—we have always said being active doesn’t need to mean having a lot of activity.”
The firm, with offices in Denver and St. Louis, currently has just under $250 million in assets under management, largely managed on behalf of high-net-worth investors.
As the current bull market pushes toward a decade, the firm is positioning itself as a lifeline for investors looking to invest in a portfolio where price matters.
Bloomstran said the firm has grown operationally to where it is more scalable and capable of working with a larger number of institutional clients and to help accomplish that brought on Tim Stidham, most recently with American Century Investments, as global head of distribution earlier this year.
“After 19 years of watching the phone, it doesn’t ring,” Bloomstran joked of the oft-debunked, if you build it they will come, marketing approach.
As institutions have turned more to alternatives to bolster their expected returns, it is important that they evaluate how their public equities portfolio is constructed, he said.
“If you are using (leverage in private equity), why would you want to use businesses in the public side that are at nose bleed leverage,” he said. Through its unwavering approach to the market and the patience it requires, Bloomstran believes Semper Augustus’ strategy will benefit institutional investors.
“I am very confident that we have the capability of finding high return on capital [through] well-capitalized, well-managed businesses,” he said.
“In a high-price, low-yield world, you are hard pressed to find asset classes that can meet return requirements. We think we are an attractive, good absolute return, low-risk option,” he added.
Foresight Eyes Broader Marketing Approach Amid Static EMoM Space
November 2, 2017
Global value equity manager Foresight Global Investors is diversifying its marketing outreach as it chases the “critical mass” point of $100 million in assets under management.
Redwood Ramps Up Marketing Of Non-U.S. Equity Strategies
October 5, 2017
Redwood Investments is ready to make a name for itself in the non-U.S. equity space.
Chilton Capital Mgmt. REIT Strategy Boasts Impressive Returns
October 5, 2017
Chilton Capital Management’s REIT team has logged some impressive numbers over its six years with the firm.
Taylor Frigon Capital Ready For Institutional Marketplace
September 7, 2017
Taylor Frigon Capital Management has spent the last 10 years creating an institutional-caliber investment manager and is now ready to take a leap into the institutional marketplace.
Mayar Capital Global Equity Strategy Drawing Interest Of U.S. Institutions
September 7, 2017
Sometimes the investors find you. For London-based Mayar Capital, that means the firm’s global equity strategy is beginning to generate interest from U.S.-based institutions, particularly in the endowment space, said Abdulaziz Alnaim, founder and managing partner of the firm.