How This Firm is Finding Undervalued Stocks

Before we discuss your recently launched ETF targeting undervalued or mispriced securities, can you familiarize our audience with your firm's investment approach and philosophy? >> Yeah, absolutely.

We'd be happy to.

So, our firm has actually been around since 1981, and during those four decades, we've stayed true to one discipline, um, buying businesses at deep discounts to what we think that they're worth over a full market cycle.

Now let's actually maybe talk about what that looks like in practice.

We start with a couple of hard numbers that we focus on in particular.

Um enterprise value to sales is a big part of what we do.

We look for very low enterprise value to sales.

And then what we look for is what we call maximum earnings yield.

Basically what can these businesses earn over the next 3 to 5 years if things fall into place.

But then the real work is is fundamental from there.

We have a team of four portfolio managers who dig into balance sheets, normalized earnings of these businesses, tangible assets, etc.

I'll give you a quick example that's a good illustration of the type of businesses that kind of come into a toll portfolio consistently.

Oil refiners, they're highly cyclical businesses.

They're tied to crack spreads, which is basically what can you sell the barrel of oil for versus the gallon of gas.

Uh, and we're often able to buy these businesses when they're actually often losing money as a result of those crack spreads being really tight.

But then over time, as the economy really cranks up, they're often able to earn substantial earnings over time.

And so um, with patience and discipline and fortitude, those are the type of businesses that we can uh do really well with and and end up in our portfolio.

Um, so having that patience and conviction to hold through full cycles, that's really been the DNA of Toll for 40 plus years.