One team. One philosophy. One process.
We strive to invest in great businesses with inherently stable values trading at a discount to our estimate of intrinsic worth. We curate an MVP list of qualifying businesses that have identifiable, sustainable competitive advantages and the ability to consistently produce free cash flow through our five-year lens. Our patient discipline, guided by the principle of margin of safety, gives us confidence to use stock price volatility to our advantage when building concentrated portfolios.
We define risk as the probability of permanently losing capital over our five-year time horizon. Market volatility is not risk. Market volatility creates opportunity for long term investors who understand that price and value are not always equal. The greater the margin of safety in terms of value over price the lower the risk of losing permanent capital. A wonderful business purchased at an attractive price has very little risk in the long run even though its price might fluctuate in the short run.
As part of our research process, our analysts identify businesses with stable values and add them to a list we call our MVP list. These businesses have identifiable and sustainable competitive advantages, produce free cash flow, and enjoy high returns on intelligently allocated capital. We patiently follow these businesses as if we own them and wait for an opportunity to invest with a margin of safety.
Our investment universe consists of all publicly traded companies including US companies, ADRs, and foreign ordinary shares.
The majority of our analytical time is spent identifying, evaluating, and understanding a subset of high quality businesses.
The remainder of our analytical time is spent on valuation.
Only the most discounted names from the subset of high quality businesses are included in our portfolios.
We seek to reduce risk by driving down the weighted average price to value ratios of our portfolios. This leads us to size positions according to discount. The higher the margin of safety, the more of the business we want to own. We seek to be fully invested at all times but will hold cash as a residual of our process when there are no discounted, qualifying investments. We tend to concentrate into fewer names when attractive discounts are available and will own more businesses when price to value ratios are less attractive.
Vulcan Value Partners’ primary return goal is to compound capital at real rates of return significantly in excess of inflation over our five-year time horizon. We believe that by focusing on the fundamental building blocks of absolute returns we will also deliver attractive returns relative to benchmarks over the long term.
Environmental, Social, and Governance
Environmental, Social, and Governance
At Vulcan Value Partners we are guided by our firm’s core values, the Vulcan Values. The first of our Vulcan Values is Serve Others Before Self. As fiduciaries we have a responsibility to serve our clients with a high standard of care and to place their interests above our own. We believe that this duty extends to not only to our clients, but also to our families, our community, and beyond. Responsible investment is central to serving this higher purpose – in the way that we operate our company, in the way that we relate to our community, and ultimately in the way that we invest on behalf of our clients.
All of our investments are made with the objective of maximizing our margin of safety in good businesses that have sustainable competitive advantages. We integrate ESG considerations into our process with that goal in mind.
Areas of Focus
We recognize that sound environmental practices can contribute to a company’s value stability. We consider a company’s environmental practices, such as carbon intensity and improved energy or water efficiency, when we view it as material to its long-term sustainability.
We consider the value a company creates for employees, customers, shareholders, and partners.
We seek companies with high-quality, properly incentivized management teams. We review management team quality, evaluating the history of management decisions and behaviors as well as ongoing behaviors to gain confidence in their skills and judgment. We look for a commitment to good corporate citizenship and a strong, healthy culture, which we believe leads to positive outcomes for companies and their shareholders.
We engage with company management on a variety of topics, including ESG, with a focus on long-term shareholder value. Our objective is to truly understand management’s strategic thinking over the long term to identify, understand, and appropriately consider ESG factors and other risks.
We believe that responsible investing includes thoughtful proxy voting. We vote proxies in accordance with our views on best corporate sustainability practices. Proxy voting is a powerful tool that allows us the opportunity to directly influence corporate policy in a way that will maximize shareholder value.
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