Mittleman still sees value in global equities

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Rather scarily, Chris Mittleman, the managing partner and CIO of US-based global equities shop Mittleman Investment Management, which has beaten its benchmark by a wide margin since the firm’s inception, says the opportunity set for his value style reminds him of 1999.

“We are at zero cash now in our fund. Our average has been about 8 per cent [since the firm’s inception in 2003].” That’s the last time Mittleman has held zero cash. And we all know what happened the following year.

Mittleman has launched an Australian-domiciled fund in conjunction with Brookvine, seeded with about $30 million. The privately owned American firm has about US$475 million of assets under management. It’s annualised return since 2003 is 15.6 per cent, compared with the MSCI ACWI benchmark of 8.8 per cent.

Chris Mittleman said at an investor breakfast in Sydney last week that, while he got into the industry as a sales person, via Shearson Lehman, in 1990, he decided he was not particularly good at that. But he did detect that value investing was the way to go. And he also detected that concentrated portfolio managers te3nded to outperform the widely diversified Lehmans. “So, I became a global value-orientated concentrated portfolio manager.”

There was a recession in the US in 1990, and Australia shortly after. Mittleman said that he noticed a New Zealand stock, Fletcher Challenge, was recommended as a ‘buy’ and he started to think about international investing. “It’s more rewarding than investing solely in the US,” he said, because there were more extremes in value from the larger universe.

If you look at Mittleman’s concentrated portfolio of 15-20 stocks, it does not look like your typical value portfolio. The firm is overweight media, for instance, including Australia’s Village Roadshow and the US cinema giant AMC. “They [AMC] shouldn’t be trading at five times free cashflow,” Mittleman said.

From Brookvine’s perspective, managing director Steven Hall, said the firm put itself in the “Buffet camp” too. He said the firm has a “private equity mentality” and applied that to public equities. The main difference was that he did not lever his portfolios.

Interestingly, Chris Mittleman said his firm tended to be indifferent to dividends, although he admitted that Australian investors were very dividend orientated, helped by imputation.

– G.B.

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