Are You Turning Over the Portfolio?

Today’s conversation is with C.T. Fitzpatrick, Founder, Chief Executive Officer, Chief Investment Officer at Vulcan Value Partners. C.T. founded Vulcan in 2007 and since then, all five strategies have peer rankings in the top 1% of value managers in their respective categories. Before starting Vulcan Value Partners, C.T. worked as a principal and portfolio manager at Southeastern Asset Management and over his 17-year tenure, his team achieved double-digit returns and was ranked in the top 5% of money managers over five, ten, and twenty-year periods consistently.

We’re again taking a different approach to this episode of the podcast. The health crisis has worsened significantly since our last episode and though there has been some stabilization in valuations, the market’s fragility is still apparent as the uncertainty about the extent of the economic shutdown and the long-run impact of the crisis remains.

In light of the extraordinary circumstances we find ourselves in, I couldn’t think of anyone better to talk about investing in the current environment than C.T. Fitzpatrick, with the benefit of his more than 30 years of experience in financial markets.

On this episode, CT and I discuss how Vulcan has improved their portfolio over the past few weeks, why it’s critical to stress-test your portfolio, how this crisis will accelerate the demise of certain industries while benefitting other companies, the parallels between the global financial crisis in 2008-2009 and the current market behavior, and so much more!

Key Topics:

• Using your investment horizon as your main risk management tool (3:57)
• Why Vulcan prioritizes value stability over discount (6:32)
• How Vulcan has improved its portfolio over the past few weeks (7:28)
• What it means to stress-test your portfolio (8:14)
• Why thorough analysis is critical in light of this extraordinary event (8:46)
• The benefit of a strong balance sheet for weathering this crisis (11:22)
• Vulcan’s approach to different asset classes (12:58)
• The strategy behind concentrating portfolios in periods of volatility (15:13)
• Why CT considers the margin of safety to be the most important risk metric (18:01)
• How the crisis will accelerate the demise of certain industries (19:44)
• The evolution of the airline industry and its weaknesses during this crisis (21:24)
• Companies that will benefit from the behavior changes triggered by lockdowns and quarantines (22:58)
• The parallels between the global financial crisis in 2008-2009 and the current market behavior (25:17)
• How the political climate has colored policymakers’ response to market volatility (28:16)
• A key difference between the global financial crisis and the current crisis caused by the pandemic (29:52)
• Analyzing potential scenarios and outcomes for companies (33:45)
• Why you need to monitor the economies in countries which are at a more advanced stage of the pandemic (35:48)
• The Vulcan investment philosophy (37:26)
• How CT analyzes a company’s valuation (40:10)
• The importance of value stability (41:47)
• Why CT believes value investing is here to stay for the long term (43:23)
• And much more!

Mentioned in this Episode:

• Vulcan Value Partners

Thanks for Listening!

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