Victrix Investment Advisors
We pursue opportunities largely off-the-beaten-path by arduously working through complex situations, sifting through the debris of financial wreckage, and seeking out-of-favor securities and asset classes where there is often limited competition. We seek a subset of such securities: those with high returns on capital, and with predictable, sustainable, free cash flow. In other words, we look for high quality businesses whose long-term potential is being obscured or systemically overlooked.
We are Value investors who will not buy a business just because it is cheap; however, we will not buy a business unless it is. We prefer companies with a competitive advantage, such as cost advantages, unique or indispensable products, or patent/trademark protections, and that have more control over their financial fortune and can create value no matter the economic environment. Businesses with competitive advantages also tend to have fewer negative developments. This increases our chances of success.
Further, we seek opportunities where talented management has several value-creating factors within its control. These factors include the sale of unprofitable or non-core divisions, achieving a more appropriate capital structure, and recovering from a scandal. Such value enhancing actions create a greater degree of control over the company’s financial destiny and, thereby, increase its, and our, odds of success.
The result is that our being right about the sale price will be less critical to our results if both the intrinsic value increases and the discount to intrinsic value closes as the market’s fears about the security dissipate.
If you have been seasick while on a boat, someone may have told you that staring at the horizon would help. The same logic applies to investors. Things like the Federal Reserve’s latest actions, policies out of Washington, and geopolitical events cause market choppiness that results in some investors feeling sick. At Victrix, we keep our eyes firmly focused on the long-term economics of the securities in which we are invested. Short-term price fluctuations are not significant to us except to the extent they enable us to opportunistically and profitably deploy capital.
Though constantly seeking to improve our portfolios, we are disciplined and invest infrequently, only after we have done extensive analysis and developed high conviction. The portfolio characteristics are:
- Long-only. Securities will not be sold short, nor will margin debt be used.
- Concentrate. Clients should expect 20 or fewer portfolio holdings. We prefer to buy great companies at good prices but are willing to buy lower-quality companies if the security is priced sufficiently below intrinsic value.
- Low Turnover. We have a long investment time horizon.
- Special Situations. Portfolios display a preference for special situation investments, which have a specific catalyst to drive value realization.
- Broad Asset Class Mandate. Portfolios are “go anywhere” but will not own real assets, commodities, or futures, and will not make private equity investments, use margin debt, or short sell securities.
- Limited Industry Diversification. Diversification will be achieved through different value realization drivers, not through the number of securities or industries.
- Cash. We have no aversion to holding a significant percentage of our portfolios in cash during times when no attractive investments can be found.