Mittleman Investment Management, LLC (“MIM”) is an SEC-registered investment adviser that provides discretionary portfolio management to individuals and institutions. We pursue superior returns through long-term investments in what we deem to be severely undervalued securities, while maintaining our focus on limiting risk. We define investment risk as the probability of long-term loss of capital. We believe that we mitigate risk by investing in businesses that are proven franchises with durable economic advantages, evidenced by a well-established track record of substantial free cash flow generation over complete business cycles, and only when the very low valuation at which the investment is made provides us with a significant margin of safety. We employ a concentrated, long-term approach, usually holding between 10 and 20 positions, for about three years on average. Annual portfolio turnover is typically 30% to 40%.
MIM invests globally, with foreign holdings representing 30% of our portfolios on average. Although we have no intentional focus on any particular size of company, nor do we operate with any restrictions in this regard, the average market capitalization of our holdings has historically been small simply because that is where we’ve usually found the greatest disparities between market price and fair value. We do buy stock in large capitalization companies as well, when they are priced attractively enough to warrant inclusion in our portfolios. Our ability to go wherever the best risk/reward ratios appear to be available, in companies small and large, domestic and international, gives us an advantage over other investment managers who operate within a more constrained investment universe.
We seek to invest when the security of a favored company is available for purchase at an extreme discount to our conservative appraisal of its fair value. Our process of security selection is research intensive, and we rely on our own analysis to make buy/sell decisions and fair value determinations. We invest primarily in common stocks of both domestically and internationally domiciled companies, of any size or market capitalization. Exchange-listed shares as well as unlisted over-the-counter securities are considered. We may also invest in debt or hybrid securities or other financial instruments which, in our opinion, present special opportunities, including securities of distressed companies and companies already operating under chapter 11 bankruptcy protection.
An important consideration in our investment process is whether or not management has a meaningful amount of their net worth invested in the stock of the company they manage. The partners of Mittleman Brothers, LLC have made substantial investments in the same stocks in which we’ve invested for our clients’ accounts, and we like to see that the management teams of our portfolio holdings are willing to eat their own cooking as well.
After identifying situations that meet our investment criteria, we wait patiently for shares of a chosen company to trade at what we perceive to be an extremely low valuation before making purchases. This aspect of our investment discipline is best described by a quote attributed to Joe Rosenberg (successful value-oriented investment manager for the Tisch family’s Loews Corp.) in Barron’s magazine in the early 1990s: “Have opinions at extremes, and wait for extreme moments.”
We believe that the difference between mediocre investment returns and above-average results is the adherence to a proven investment discipline. And the difference between above-average results and outstanding investment returns stems mainly from the degree of selectivity and patience employed in the application of that discipline. That patience being most critical during the humbling down cycles, like the particularly brutal one we endured most recently from May 2007 until March 2009. The key rules are don’t swing the bat unless it’s a slow pitch right down the middle of the plate, and don’t be bullied by the market into doing something irrational, whether buying or selling. This may sound obvious or clichéd to some, and perhaps confusingly ironic to others, but the ability to sit and do nothing may be the most rare and valuable investing skill of all. Inevitably, extreme price dislocations occur that create real opportunities for action, and only the patient and prepared investor can recognize such ideal situations and take full advantage. We work relentlessly to do just that.
Like-minded investors are welcome to join us.