A new fund has been launched to capitalize on stocks selling significantly below their break-up and/or their intrinsic value.
The new Kaizen Fundamental Value Fund aims to identify upcoming events or catalysts expected to "unlock" this value.
The new fund, sponsored by Magnum Global Investment Ltd, seeks to achieve superior long-term capital appreciation by identifying and investing in businesses with unrecognized "fundamental value."
"Fundamental value is the break-up value or the discounted value of the cash that can be taken out of a business during its remaining life (intrinsic value) -- in other words, what a company could really be worth long-term rather than how its stock may be trading at a given moment," says fund manager David W Berry. "Our focus is on buying a business as opposed to buying a stock."
The firm states: 'Thorough bottom-up due diligence, with Berry and co-manager Adam R Michael spending more than 25% of their time speaking to and visiting with companies, results in a 'private-equity like' approach to making investments'.
A little more than a third of the investments are in the oil & gas industry, where Berry has more than 30 years experience building and running E&P (exploration and production) companies and has developed a wide network of contacts. As a result, the fund's 'Natural Gas Ranching Strategy' has outperformed energy indices (OSX, XNG, XLE) by several multiples since inception.
The non-energy portion of fund has also outperformed broader market indices by several multiples since inception. The fund's opportunity-specific investments -- many of them culled from "idea-sharing" relationships with a small group of investors, advisors and peers -- are generally not correlated to each other or to the S&P 500. During the 40 months since inception of the strategy, the S&P 500 Index has had 13 negative months with a total loss for those months of 22%, while the strategy gained 25% during those 12 negative months - an outperformance of 47% during the negative months for the S&P Index.