The Olstein Funds – Look For Solid Businesses Facing Strategic Challenges

One of the firms we follow closely at The Acquirer’s Multiple is Olstein Capital Management and its Chairman, Bob Olstein.

Last month, Olstein’s Executive Vice Chairman Eric Hayman did a great interview with The Wall Street Transcript (TWST) in which he discussed how the firm finds value opportunities in a world of information overload.

Hayman says, “We believe that a forensic analysis of company balance sheets, income statements and other regulatory filings is more useful when assessing a company’s ability to produce future free cash flow than management forecasts, earnings guidance or company visits.”

This Tiger Cub Giant Is Betting On Banks And Tech Stocks In The Recovery

D1 CapitalThe first two months of the third quarter were the best months for D1 Capital Partners' public portfolio since inception, that's according to a copy of the firm's August update, which ValueWalk has been able to review. Q2 2020 hedge fund letters, conferences and more According to the update, D1's public portfolio returned 20.1% gross Read More


Here’s an excerpt from that interview:

TWST: Is there any unique investment philosophy in the fund?

Mr. Heyman: Our focus on turnaround situations and companies facing strategic challenges makes our investment approach unique. When most investors think of investing in small to midsize companies, they tend to think of fast-growing companies or finding the next Google (NASDAQ:GOOG), Netflix (NASDAQ:NFLX) or Facebook (NASDAQ:FB).

We focus on a different type of company: those small to midsize companies with strong products or services that have stumbled or hit a wall, usually due to Wall Street’s demands for constant growth. Our approach to finding value in companies with temporary issues or companies that need an operational turnaround makes us very different than our peers in the smid space.

Another unique element of our investment philosophy and approach is our focus on the quality of earnings and our intensive company-specific analysis. One of the fundamental tenets of our investment philosophy is that in today’s world of information overload, a forensic analysis of a company’s financial statements, regulatory filings and accompanying footnotes is the best way to determine the quality of a company’s earnings, the success of its strategy, the sustainability of its performance and the impact of management decisions on future free cash flow.

We believe that a forensic analysis of company balance sheets, income statements and other regulatory filings is more useful when assessing a company’s ability to produce future free cash flow than management forecasts, earnings guidance or company visits.

You can read the full interview with TWST here.

This article was originally posted by Johnny Hopkins at The Acquirer’s Multiple.

Previous articleBlackstone Nears Massive Exit, Backs Two Other Businesses
Next articleBitcoin Is All That Stands Between My Family And Starvation
The Acquirer’s Multiple® is the valuation ratio used to find attractive takeover candidates. It examines several financial statement items that other multiples like the price-to-earnings ratio do not, including debt, preferred stock, and minority interests; and interest, tax, depreciation, amortization. The Acquirer’s Multiple® is calculated as follows: Enterprise Value / Operating Earnings* It is based on the investment strategy described in the book Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations, written by Tobias Carlisle, founder of acquirersmultiple.com. The Acquirer’s Multiple® differs from The Magic Formula® Earnings Yield because The Acquirer’s Multiple® uses operating earnings in place of EBIT. Operating earnings is constructed from the top of the income statement down, where EBIT is constructed from the bottom up. Calculating operating earnings from the top down standardizes the metric, making a comparison across companies, industries and sectors possible, and, by excluding special items–earnings that a company does not expect to recur in future years–ensures that these earnings are related only to operations. Similarly, The Acquirer’s Multiple® differs from the ordinary enterprise multiple because it uses operating earnings in place of EBITDA, which is also constructed from the bottom up. Tobias Carlisle is also the Chief Investment Officer of Carbon Beach Asset Management LLC. He's best known as the author of the well regarded Deep Value website Greenbackd, the book Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014, Wiley Finance), and Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012, Wiley Finance). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law. Articles written for Seeking Alpha are provided by the team of analysts at acquirersmultiple.com, home of The Acquirer's Multiple Deep Value Stock Screener. All metrics use trailing twelve month or most recent quarter data. * The screener uses the CRSP/Compustat merged database “OIADP” line item defined as “Operating Income After Depreciation.”