Value investing is the philosophy of buying assets below their intrinsic value and selling them above intrinsic value. Traditionally, value investors buy companies at valuations that are either below the net asset value of the company or at a low multiple of the cash flows or earnings the business generates. Recognizing that low-quality or declining businesses may have justifiably low valuations, many value investors are willing to own faster-growing and higher-quality businesses at higher multiples that are nevertheless below intrinsic value.
Cable Car practices value investing, broadly defined. Some of its holdings are “deep value” securities trading below the value of their net assets. Other investments involve stocks whose multiples are low on an absolute basis or relative to the business’ quality and growth prospects. Cable Car also looks for mispricings that arise due to corporate actions such as tender offers, mergers and acquisitions, and other special situations. The main thing its largest investments have in common is some form of downside protection relative to the potential return, whether through valuation, asset value, or cash flows. Like many value investors, Cable Car has a contrarian bias, often preferring investments in lesser-known companies or those that are out of favor in the marketplace.
More information about Cable Car’s investment strategy is available on the investment approach page.
Posted in: Individual investors