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Equity Value

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Philosophy

Value investing is not a timely fad, but a timeless discipline that can yield attractive performance when consistently and intelligently applied over long periods of time.

  • Time-Tested: Value investing has outperformed growth over the last half-century nearly sixty percent of the time and by approximately 2.4% per annum.1
  • Consistency: Historically the prevalence of investors’ cognitive biases consistently create market mispricing and investment opportunity.
  • Risk-Oriented: Divergences between the perception of risk and actual underlying business or economic risk has created opportunity for risk-adjusted returns.
  • Contrarian: Mean-reversion in capital markets has rewarded the thoughtful contrarian investor who exploited the divergence of market price and underlying value.
  • Long-Term Thinking: Longer investment horizons can capture mean-reverting and compounding opportunities even as volatility generally declines.

Strategy

Target opportunities from temporary disconnects between price and value, reliably caused by cognitive biases, which can be exploited with diligence, creativity and patience. Known as “fundamental value,” our differentiated strategy represents a thoughtful application to value investing principals.

  • Think Differently: We view value as more than merely statistically cheap and seek a differentiated view of assets based upon underlying business and economic fundamentals.
  • Long-Term View: We evaluate investments on an investment horizon of three to five years or longer to allow markets to separate information from transient noise.
  • Knowledge as Power: We endeavor to understand business on a deeper level, thereby giving us the conviction to stand against the crowd with a differentiated portfolio.
  • Price vs. Value: We understand the distinction between market prices and underlying intrinsic value of our portfolio holdings, seeking to invest when the former are much lower than the latter.
  • Growth vs. Value: We reject as a false dichotomy the growth-value debate and instead seek to include growth as a driver of value, as long as it is reasonably priced and carries attractive risk-adjusted returns.
  • Focus: We know that time is our scarcest resource and that good investment ideas require effort to uncover, so we focus on our most attractive ideas because they are scarce; to do otherwise would dilute the portfolio.

Process

Repeatable research process with diversified idea sourcing, detailed due diligence, sound judgment, a long-term time horizon, and price discipline. Sound portfolio construction and management principles, which include consideration of macroeconomic factors and business cycles.

  • Idea Generation: We rely upon broad and diversified sources of investment candidates to help ensure a steady flow of ideas.
  • Initial Evaluation: We employ an initial vetting of investment ideas so that only those with the greatest potential undergo our more robust and detailed securities analysis.
  • Fundamental Securities Analysis: We undertake substantial due diligence to develop deep investment insights that are essential for establishing our own assessment of intrinsic value, risk assessment and investment conviction.
  • Team Review: Our weekly investment meetings allow fresh eyes and devil’s advocates to conduct a thorough evaluation of new and existing investments.
  • Portfolio Construction: We construct and manage our concentrated portfolios based upon our assessment of risk-adjusted returns and wider macro conditions.
  • Buy-Sell Discipline: We manage our portfolios with disciplined and thoughtful purchase and sale decisions that are based upon our research and portfolio construction principles, as well as pricing discipline and diversification goals, in order to minimize emotion and mistakes.

  1. Source: Fama and French data, 1965 through 2018; value-growth distinction based upon price-to-book ratios; frequency of outperformance is on a non-rolling basis; rate of annual outperformance on a 5-year rolling basis
DoubleLine Equity Value

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DoubleLine

333 S. Grand Ave.
18th Floor
Los Angeles
CA 90071

213.633.8200

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