At Corbyn, we have always sought to minimize portfolio volatility and preserve capital during times of market turmoil. We believe that this “protection of principal” mentality has proven effective during the highly volatile conditions of recent market cycles. Looking forward, we feel that our goals of providing steady, consistent performance will continue to differentiate our firm and make our investment programs particularly attractive.
As investors, we focus on inefficiently-followed securities that we believe are undervalued and often possess company-specific catalysts for future appreciation. By carefully investigating these companies and understanding the motivations of the management teams, we attempt to identify attractive investments selling at discounts to the underlying value of their business models.
While following this investment discipline, we strive to produce investment returns that expose our client portfolios to markedly less risk and volatility over an entire market cycle.
Corbyn seeks to identify equity securities that:
- Trade at a discount to their industry peers and/or the overall market
- Are overlooked, temporarily out of favor or not widely followed by the investment community
- Show potential for appreciation because of company-specific reasons or events
- Are less dependent on favorable movement in the overall markets to build shareholder value
Corbyn relies on its own research-intensive efforts to uncover these securities, taking into consideration:
- Management of the company
- Quality of the company’s balance sheet
- Past and expected future profitability
- Potential for free cash flow generation
- Market position of the company in its industry and overall prospects for industry
- Company-specific events: e.g., anticipated success of a new product, change in management, takeover likelihood, etc.
- Valuation in relation to its peers and its historical valuation
Corbyn seeks to identify fixed income securities that typically:
- Are available at attractive prices due to inefficient pricing by the investment community or misunderstood factors
- Mature in the near-term, often with put or call features; therefore, mitigating interest-rate risk
- Provide higher returns than that available on short-term Treasuries or money market funds
Corbyn also seeks to identify fixed income securities that are capable of producing equity-like returns without the volatility that is inherent in the stock market.
“As investors, we spend a tremendous amount of time looking at a company’s balance sheet, cash flow and capital structure. In fixed-income investing, for instance, we believe that different levels of the capital structure have different risk profiles. By drilling down into a company’s capital structure, we target the specific bonds that have clear paths to repayment and low correlation to broader market risk.”
Chip Carlson, CFA – President of Corbyn Investment Management