While perhaps not a household name like Buffett or Lynch, Alexander Roepers’ Atlantic Investment Management has posted stellar results since its inception in 1988. Performance data is not publicly available but performance figures pop up from time-to-time. The latest updates point to an annualized return of about 18% since inception for Atlantic’s largest investment fund, the Cambrian Fund.
Roepers’ investment approach is quite straightforward and has been articulated in numerous interviews and on the Atlantic Investment Management website. Value Approach Roepers seeks companies trading at less than 8x EBIT and/or 10%+ free-cash-flow-yield. Focus on What You Know In an interview with Value Investor Insight in 2007, Roepers said, “I realized early on from watching people like Warren Buffett and some of the early private-equity players that if I was going to stand out, I needed to concentrate on my highest-conviction ideas, in a well-defined set of companies that I knew very well.”
The Cambrian Fund typically has less than 10 investments at a time. Roepers rules out companies in the high-tech and biotech sectors, companies with potential future liabilities and companies that are in sectors that are highly regulated by the government. After narrowing down the investment universe, Roepers and his team are left with about 350 global companies to closely monitor. The remaining companies tend to be “nuts and bolts” companies like diversified industrials, chemicals, defense suppliers, and packaging firms.
Past and current investments include, among others, Energizer, Rockwood Holdings, Clariant, Joy Global, Commscope, Diebold Nixdorf, Eastman Chemical and Koito. Predictability and Competitive Advantages Like Warren Buffett, Roepers places a high value on predictability and competitive moats. He looks for dominant players in industries where there are only few competitors and high barriers to entry.
Take Advantage of Temporary Problems Even great businesses can run into temporary issues—poor pricing due to excess capacity, operational hiccups, high raw materials costs, etc. This is when Atlantic Investment Management and Roepers' team pounce.
Don’t Stay Too Long Positions are sold as they approach 11x EBIT, typically in 1 to 2 years after the investment is made.
The tickrz Alex Roepers Screener will help you uncover high moat stocks with low EV/EBITDA multiples and high free cash flow yields. Note that tickrz applies Roepers' approach to all sectors--make sure to apply your own "focus on what you know" filter!