The Insiders’ Guide to Asset Value Investors (AVI)
“If you pick the right companies, if you look behind the value, if you know where to find what’s actually driving the business, you’ll learn you can realise a company’s value potential, while at the same time identifying how it can generate long-term growth.”
– Joe Bauernfreund, CEO and CIO at Asset Value Investors
At Asset Value Investors (AVI), our aim is to provide a smarter way of investing. We are investment managers with a simple goal – to deliver long-term capital growth by identifying and investing in companies with significant growth potential, and whose shares are trading at a discount to their intrinsic value.
No rock is left unturned. Our twelve-strong investment team work tirelessly to identify and understand companies which have been overlooked and under-researched by other investors. Companies which, we believe, are priced below their true market value. The companies we ultimately invest in are good quality companies which have the potential to be turned into profitable performers achieving long-term growth.
Who are AVI?
Initially formed in 1985 to take over the management of one of the oldest Investment Companies in London, AVI has spent 36 years refining and enhancing our unique investment strategy, which we describe as ‘value with a difference’. Today we offer investors a specialist, research-driven approach, with two portfolios managed in our unique style:
- The AVI Global Trust (AGT) is a global portfolio originally established in 1889. Since 1985, AGT has been managed using AVI’s value with a difference approach, aiming to achieve capital growth through a focused portfolio, investing in companies whose value stands at a discount to their intrinsic value
- The AVI Japan Opportunity Trust (AJOT) focuses on over-capitalised small-cap Japanese companies. Our team has over three decades’ experience in this under-researched area of the market.
Value with a difference
Our focus is on buying high-quality businesses trading at a discount, overlooked and under-researched companies which have the potential to narrow their value discount.
We are stock pickers who use fundamental analysis, and we prioritise our own internal research so that we can fully understand each and every business that interests us. We look at metrics and ratios as other investors do, but we also look beyond that. We look for value companies, removing those which have high debt or other problems contributing to their low valuations. From a list of thousands of companies we quickly funnel down to a universe of around 400, ultimately deciding on a core portfolio of 20-25 companies for AGT and the same for AJOT.
Typically, we’re interested in three types of assets:
- Holding Companies
Companies with a high-quality portfolio of businesses, with the potential for sustained, above average, long-term growth. We look for the presence of a controlling family or shareholder with a record of delivering returns in excess of their peers, and companies trading at a discount to NAV (the ‘Net Asset Value’ of the company).
- Closed-ended Companies
We look for portfolios of high-quality assets with good growth potential. In line with our value with a difference approach, we look for companies at a discount to NAV, but in the case of closed-ended companies we engage with management to work towards high probability assurances that the discount will narrow or vanish altogether.
- Asset Backed Special Situations
We look to invest in cash-rich Japanese operating companies, quality businesses with low valuations. We’ve been investing in Japan for three decades now and we see a particular
opportunity in the region as companies improve their digital infrastructure – a requirement across all businesses in Japan. This, we believe, will help companies realise their intrinsic value, while also driving significant growth long-term.
A detailed approach
We aim to understand every company in our portfolios. We promote and initiate active involvement and engagement with the management of every company we invest in. We learn about their businesses in great depth, developing close partnerships with them so we can work together on suggestions and improvements, which we believe could improve their operations and help narrow the value discount.
We’re not market timers. We look for which companies will do well based on the economics, not by guessing which way the market is going to go. We look at what’s happening within a company, and how that relates to current market conditions.
For example, towards the end of 2020 we were proactive in thinking about the potential rollout of the Covid vaccine. At that stage we were in defensive stocks which were more technology-based because of the fact everyone was locked down and working remotely. Then we rotated into the type of stocks which we felt would recover as the economy started to return to normal.
Our value with a difference strategy has served us well for over three decades. Our experienced team of investors are highly skilled in picking the right companies, in identifying businesses which can release their value potential while at the same time generating long-term growth. It’s a strategy which has provided annualised NAV total returns of 12.1%* for AGT since 1985. It’s an approach decades in the making, and it works for us.
*Source: AVI/Morningstar CUM Fair Value Total Return as at 31 January 2022.