Strategy

Contrarian, Value Investors

Philosophy

Disciplined Fundamental Value Investors Since 1978

Sound Shore Management, Inc. was founded on the belief that the pursuit of a disciplined, value-oriented investment style provides the opportunity for investors to reap the full-cycle rewards of the equity markets, while maintaining a keen focus on risk.

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Disciplined Fundamental Value

Sound Shore’s consistent application of its disciplined, value-orientated investment style provides the opportunity for investors to reap the full-cycle rewards of the equity markets.

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Contrarian Approach

We research companies selling at low absolute and relative valuations that have fallen out of favor with Wall Street but not lost long-term earning power.

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Favorable Risk/Reward Profiles

Risk mitigation is embedded in our careful selection of out-of-favor stocks where we have identified sustainable business models and company-specific drivers of value.

Process

01

Screening

  • Identify the least expensive large cap stocks based upon the lowest absolute price/earnings ratios (“P/E”) as well as the P/E relative to company history
  • Review price/cash flow, price/book value, return on invested capital, and free cash flow

02

Valuation Analysis

  • Analyze historical valuation ratios and “Value Check” to confirm each stock’s attractiveness
  • Supplement Value Check using additional techniques such as discounted cash flow, sum of the parts, and private market value
  • Set high and low price targets based upon our estimates of earnings and cash flow

03

Fundamental Analysis

  • Determine the sustainability of the business with emphasis on improving free cash, return on invested capital (ROIC), shareholder returns and long-term focus
  • Internal research and direct contact with company management teams, competitors and proprietary unbiased sources
  • Build our own financial models projecting revenue, earnings, and cash flow with quarterly detail
  • Evaluate material ESG factors at the company and portfolio level. In the bullet below that change it from direct contact to direct engagement

04

Sell

  • Stocks sold when price target is achieved or when our investment thesis changes
  • As long-term investors our typical holding period is 1 to 3 years

Portfolio Construction

Holdings

Approximately 35 - 40 equities

Industry Weighting

%
Maximum of 25%

Cash Position

%
Generally < 5%

Stock Position

%
Average between 2 - 4%. Maximum 5% at cost

Turnover

%
Approximately 50 - 75%

Portfolio turnover may not be limited during periods of significant redemptions or when, based upon investment considerations, the Fund’s managers deem it necessary to make changes to the Portfolio’s holdings.

Case Study

TMO vs HC vs RLV1000

As of September 30, 2021 Thermo Fisher Scientific, Inc. comprised 0.00% of the fund.  Portfolio holdings are subject to change.  Past performance is not an indicator of future results.

Thermo Fisher Scientific

Thermo Fisher Scientific Inc. (TMO – NYSE) is a leading medical products and lab equipment supplier and a classic Sound Shore Case Study. Our contrarian investment philosophy has always focused on finding attractively valued companies with internally driven earnings that can surface value for years to come. Our long-term investment process looks forward to assess where a company’s normal earnings power will be. This leads us to stocks with management teams employing strategies that are durable and have sustainable businesses we want to partner with in our portfolio.