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.”
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.
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