We are value investors.
Our name means a lot to us. We believe that value investing works because controlling quality assets at a discount to what they are worth earns attractive returns over time. This principle is the core of each investment decision we make.
Every security is a financial instrument that represents some type of claim against assets. It is the work of every value investor to understand what those assets are, what they are worth, and what price they are paying to control them when they buy a security.
We are value investors because we have conviction in the underlying logic of the approach. We have also had the benefit of testing this discipline through some extraordinary – and extraordinarily different – market periods.
Value investing is not always easy, and is not always in fashion. It is a straightforward proposition but it requires both a high level of expertise and steadfast discipline to use it adeptly in all sorts of economic and market climates.
At ValueWorks we have deployed this approach through periods of huge investor enthusiasm and euphoria, through periods of financial crisis and panic, and even through some moments of calm and investor ennui. Through it all, we have stayed with this discipline, and draw the simple conclusion that is in our name.
Hedge fund performance as ranked by the BarclayHedge's database
Hedge fund performance as ranked by the BarclayHedge's database
How We Think
Philosophy
At ValueWorks we define value investing as buying the best-quality assets at the best possible prices. We like to think of ourselves as bargain hunters: it is our goal to pay only $0.50 to $0.75 for $1.00 worth of assets. We evaluate the component parts of a company, assigning each of its assets a dollar value that, when added together, comprises the underlying value of the company; if this is higher than the company’s stock price, we consider it an investment opportunity.
These principles are straightforward, but converting them into practice requires a sophisticated and consistent process. It entails extensive independent research, a high level of expertise—in appraising both assets and claims—and the discipline not to be led by emotions when market conditions are volatile.
Risk
Risk is best controlled in our process through knowledgeable security selection, reasonable diversification and steadfast discipline. Careful and diligent security selection can lower the chances that we simply make a mistake and mis-appraise the assets or liabilities; and it can limit the likelihood that something changes in a unexpected way to fundamentally alter the math. Diversification can limit the impact of a single mistake; it can also limit the impact of a company, sector or group going more out of favor and trading at a larger discount to the underlying value.
In periods where investor enthusiasm or despair drive overall valuation to particularly large premiums or discounts to underlying value, ValueWorks has found the best risk control to be discipline. Our experience has been that those larger disconnects, whether in a sector or the overall market, run their course remarkably quickly; often during these events the emotional temptation is to move in a certain direction and it is discipline that keeps the portfolio on track for long term results.
Our Investment Process
On any given day, security prices reflect and react to many factors beyond the underlying value of a business. Such disparities between a security’s price and a business’s value are what we as value investors seek out. At ValueWorks once we identify this type of situation we then look for opportunities where the value of the underlying assets is growing, and where the disparity in valuation is expected to narrow. We do this by using a well-planned series of steps.
1. Identification
We often find investment opportunities where quality securities have fallen out of favor with the market. Whether or not we identify a security through this contrarian approach, we will always determine if a security is a promising prospect by submitting it to an abbreviated version of our process. If the security passes this initial test, we will then take an in-depth look at the company.
2. Assessment
When we value a company, we determine its ‘underlying value’ by identifying, analyzing and pricing its assets. We also determine whether the asset base is likely to increase in value over time. We will decide to invest in a company only if its assets are currently undervalued and appreciating.
3. Appraisal
Once we determine that a security trades for less than the value of its assets, we identify the key factors that could eliminate this valuation gap and increase the security’s price. We then identify and value all the claims against the company’s assets. Only then can we evaluate the price required to control a particular instrument—and make either a positive or negative investment decision.
4. Re-evaluation
We monitor our portfolios to ensure that companies continue to exhibit the traits that originally made them good investments. We are also watchful so that changes in market conditions do not unexpectedly alter the merits of particular investments.
5. Exit
We sell securities when they have realized our estimate of their assets’ value, or when new developments lead us to believe that part of our original conclusion to buy them is no longer valid.
Portfolio Structures
We translate our value discipline into a number of different portfolio architectures designed to meet specific investor objectives. We manage individual portfolios that are each grouped into a composite of similar portfolios that employ a set of portfolio rules.
In every composite we seek to create diversification by building exposure to a large number of industries and sectors rather than by simply including a large number of individual companies. By our measure, there is more diversification in 25 securities spread among fifteen industries than 100 securities spread across five industries.
Then, for each group of accounts, we use different rules to build portfolios that fulfill particular investor objectives. These composite rules guide the mix of asset classes (equities, high yield, investment grade debt), as well as market capitalization, position size, use of leverage, and short exposure.
Generally, we offer independent investment management in a Separately Managed Account (SMA) format. This structure provides transparency, flexibility, and the opportunity for customization. Other account formats are available for particular portfolio architectures—feel free to ask us about what is available and what is appropriate.
The Team
Charles Lemonides, Founder
Charles founded ValueWorks with the goal to broaden availability of his conceptual value investing discipline in the retail and institutional investor communities. Charles leads investment research and portfolio management at ValueWorks and has final authority for all investment decisions.
Charles’ philosophy of value investing was born at the regional brokerage Gruntal & Co. During his tenure in Gruntal’s Research Department beginning in 1986, Charles honed skills covering risk arbitrage, the banking industry, and special situations. He notably spearheaded the addition of high yield bonds and distressed securities to the department’s coverage. In 1994, Charles joined Sterling Advisors, an investment advisory unit of Gruntal & Co.; he became Chief Investment Officer of Sterling the following year. In 1999 Charles merged this internal investment practice into the independent advisory firm M&R Capital. As Chief Investment Officer of M&R Charles began branding the composites he brought over from Sterling under a ValueWorks banner, laying the ground for establishing ValueWorks as a fully independent firm in October of 2001.
Charles received his Bachelor’s degree in History from Vassar College and pursued graduate studies in Economics at New York University. He received his CFA designation in 1989 and is a member of the New York Society of Security Analysts. Charles has been featured in prominent print and broadcast financial media throughout his career. Charles is a lifelong New Yorker and an avid traveler. The only place he finds more engaging than NYC is the place on the map he is visiting next.
Mario J Del Pozzo, Managing Director
Mario joined ValueWorks in 2018 and is responsible for the Business Development efforts of ValueWorks and for maintaining superior relationships with existing clients and expanding Valueworks’ reach with the Institutional community. Prior to this position, Mario ran a European Single-Family Office in New York City with a focus on Alternative Investments and Real Estate.
He has spent over 25 years in the financial sector both in New York City and Europe specializing in capital markets and wealth management, primarily focused on the sales and trading side of the business. Mario also served as a Director of Theorema Europe Fund Ltd (a European long/shorty equity fund) between 2009 and 2015.
Mario holds a B.A. in Economics from Vassar College and an M.B.A. from INSEAD, in Fontainebleau, France.
Mario enjoys the outdoors and is an avid alpine skier and tennis player.
Mac Campbell, Analyst
Mac is primarily responsible for contributing to the research and analysis process at ValueWorks, working closely on a day-to-day basis with our CIO. His focus is mainly on small-cap and less liquid securities.
Mac initially interned at ValueWorks in 2019. After graduating from the University of Alabama, he rejoined the team full-time. He holds a B.S. in Finance with a concentration in value investing. He shares a passion for value investing, and his skill set perfectly matches ValueWorks' mission.
In his free time, Mac loves being outdoors and on the water. He enjoys many outdoor activities including alpine skiing, surfing, and golf.