Differentiated Approach to Quality Value Investing
Broad-minded and nimble, Scharf Investments looks for value everywhere. We select securities of various market caps, styles and countries. By identifying compelling investments in companies large and small, foreign and domestic, we’re able to put dollars to work wherever we find opportunity.
We employ our proprietary Multi-factor Analytical Performance (MAP) screen to help identify companies that have appreciation potential of at least 30-40% over the next 12-24 months. Our analysts do further research, and only companies with the best quantitative and qualitative characteristics are chosen to construct portfolios with the capacity for predictable earnings.
Low Valuation Works
Study after study has shown that stocks with low valuation ratios—low price/earnings (P/E), low price/cash flow, low price/book—outperform stocks in general by a wide margin. Many times high P/E’s reflect too much optimism about a company’s future while low P/E’s reflect too much pessimism.
We believe that less risk means more reward, and that risk is paying more than the value of the asset while reward is paying less. However, because value may not be easy to discern and may not be precisely quantifiable, stocks must be purchased with a large margin of safety. Our goal is to find stocks that we believe have (1) a much greater chance of rising than falling and (2) much more upside price potential than downside risk.
Patient, Proven Approach
There are times when a stock price does not reflect a company’s underlying value. Once we have identified such an opportunity and purchased a stock, we are prepared to wait for an eventual convergence between price and value. Our average holding period for an issue is about three to four years.
We remain focused on high probability, long-term process rather than random, short-term outcomes. Scharf stands by our disciplined strategy because history has shown that buying good companies at a discount is a proven way to build wealth.