Value Strategy
Huntington follows a path of value investing by which it has generated annual returns substantially in excess of the Standard and Poors 500 Index.
Huntington's strategy is to form an in depth understanding of the businesses in which it invests. We study individual companies, taking into account their costs of production, their value proposition, their competitive environment, their market position, their customers, their regulatory environment and their purchasing power as well as other relevant fundamental factors.
Much like other value investors, we only invest in businesses we understand. In our case, that primarily means prosaic manufacturing, service, distribution and retailing companies. We typically hold our investments long term and therefore seek out industries not subject to immediately foreseeable shifts in the competitive landscape.
Huntington typically invests in businesses with enterprise values of $250 million to $3 billion. We search out companies whose valuations have fallen precipitously due to their own failure to meet prior expectations as well as those whose industries fall from the favor of Wall Street analysts. Typically our portfolio companies attract little or no sell-side research.
We take positions of up to $10 million in a given security and monitor it carefully. While we research approximately 50 stocks on an ongoing basis, we typically invest in no more than six companies at one time.
When investing we also look for the probability of triggers which will motivate the companies' boards to achieve a liquidity event for the benefit of shareholders. However, such an event is considered an added benefit and not the primary motivation for our investment.
We are most comfortable in enterprise values that do not exceed 1.5 times tangible book value and earnings (EBITDA) multiples which are at a discount to those that the company might trade for on a private basis. We feel that the opportunity to buy into a public company that has not been primed for sale, offers more potential than investments made by bidding in auctions for control of businesses.
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