Our Edge
What makes us different
Investors
We believe our philosophy to be sound and our strategy unique, but it is only repeatable if research personnel have the right temperament to maintain discipline in volatile markets.
We believe our blend of Core and Deep Value companies, our ability to identify Key Theses Points™ (long-term business catalysts), and our ability to opportunistically overweight Deep Value Companies is unique in the marketplace. These are key ingredients in the “secret sauce” of our strategies.
Research Temperament
We believe our philosophy to be sound and our strategy unique, but it is only repeatable if research personnel have the right temperament to maintain discipline in volatile markets.
Unique strategy
We believe our blend of Core Value and Deep Value companies, our expertise in identifying Key Thesis Points™ (long-term business catalysts), and our ability to opportunistically overweight Deep Value Companies is unique in the marketplace. These are key ingredients in the “secret sauce” of our strategies.
Contrarian
Common situations that lead to contrarian buying opportunities
- Overreactions
to short-term
results
- Fears that cyclical issues
are secular
- Prolonged
turnarounds/
Wall Street apathy
- Firm or its
industry is
maturing
- Misunderstood
balance sheet
or accounting
- Increasing market
influence of non-
fundamental
investors
- Struggling segment
overshadowing
other strong
business lines
Core Value and Deep Value Sleeves
The strategy is designed so that the weighting of Core Value businesses in the portfolio will always be larger than the more volatile Deep Value companies (Deep Value max weight of 50%)
Core Value companies are wide moat businesses with high returns on capital, sustainable competitive advantages, and strong management teams. We identify them with our proprietary Ten Point Review Process.
Deep Value companies are good businesses with sound balance sheets. We believe that they are simply misunderstood and oversold which presents us with an inefficiency we can exploit for our investors.
Other managers tend to invest in one or the other. We think this unique combination provides greater upside potential with a more palatable volatility profile for the typical investor.
Key Thesis PointsTM
How do we avoid “value traps” or “falling knives?” We believe our ability to identify and monitor Key Thesis Points™ is critical to helping us avoid pitfalls common to the value-oriented investor.
Team narrows down its investment research to a few Key Thesis Points™ which:
Identifies the most important long-term catalysts for each business’ fundamental success
Allows for efficient ongoing portfolio monitoring – focusing on the few things that matter most
Helps maintain conviction when short-term noise overwhelms sentiment and stock prices
Allows for quick identification of mistakes-if thesis points break down, stock is immediately sold
Patience
Core Value
When buying wide moat Core Value businesses at a discount, we intend to hold them for at least three to five years and anticipate that our fair value estimate will increase as the company continues to be successful and fundamentals compound.
Deep Value
Our low turnover and methodology for implementation leads to a relatively tax-efficient strategy for the taxable investor.
The visual shown above is for illustrative purposes only and does not guarantee a certain level of performance or success. Not all investments will reach or exceed their estimated fair market value. Investors can lose all or part of their money.
In an increasingly short-term oriented world, we believe our research team’s patient temperament is an important differentiator for successful implementation of our discipline.
Tactically Overweight
Deep Value
Deep Value Weight Scale
All portfolio weighting decisions are based on the opportunities we see from the bottom up, company by company. There are times we will sell Core Value companies to own better risk/reward opportunities in Deep Value. Opportunistic Deep Value overweighting decisions have added significant returns since inception.
Deep Value Weight of All Cap Value Strategy
European Debt Crisis
The European Debt Crisis and US Credit Rating downgrade in 2011 led to volatility and Deep Value opportunities.
FAANG 1.0/Momentum
Advent of megacap tech stock dominance and the “momentum factor” led to contrarian opportunities in less favored Deep Value stocks (particularly in small cap value)
Deep Value Downdraft (FAANG 2.0)/Pandemic
Market preference for growth and Covid-19 effects led to historic buying opportunities for out of favor Deep Value stocks.
We expect both sleeves to generate alpha.
The overall portfolios have delivered market-like beta, a more palatable return stream than most Deep Value only portfolios.
Identifying undervalued securities and other assets is difficult, and there are no assurances that Clifford Capital Partners’ fair value estimates will be accurate or that its strategies will succeed. As with all investing, the potential for profit is accompanied by the risk of loss. Portfolios are concentrated in 25-35 stocks, which can lead to increased short-term volatility; and greater possibility of all or some principal loss. Deep value or out of favor stocks may also increase the potential loss of principal as well as result in greater portfolio volatility as compared to more traditional investment approaches. The prices of common stock fluctuate based on changes in the financial condition of their issuers and on market and economic conditions. Events that have a negative impact on a business probably will be reflected in a decline in the price of its common stock. Furthermore, when the total value of the stock market declines, most common stocks, even those issued by strong companies, likely will decline in value.