Adam Sues outlines an investment strategy focused on deep value stocks, mispriced special businesses, and event-driven investments. The strategy seeks balance sheet bargains trading below asset value, stable businesses with sustainable competitive advantages selling at a discount to normal earnings, and special situations with a clear catalyst for intrinsic value realization. Key metrics for deep value include low debt and positive retained earnings, while metrics for special businesses include stable margins and high returns on capital. Event-driven investments aim to earn stable, uncorrelated returns from mergers, bankruptcies, and other time-bound opportunities.

1. Investment Strategy
by Adam Sues
Deep Value Mispriced Special Businesses
Balance Sheet Bargains Discount to Sustainable Earnings
• Boring, even mediocre, businesses selling at • Businesses trading at a discount to
discount to conservative asset valuation normalized earnings power (using FCF)
• Net-net Investing: securities trading at a • Special businesses with a sustainable
discount to net asset value competitive advantage (wide moats)
• i.e. – buy a stock for the cash in the bank and • Lengthy evaluation: avoid overpaying for
get a business for free ‘peak’ earnings or promises of future growth
Key Metrics Key Metrics
Low or nonexistent debt, low P/B, Stable or increasing margins,
positive retained earnings, high and improving ROIC/CROIC,
insider ownership low EV/EBIT or EV/FCF
Event-Driven Investments
Stable Returns in Unstable Markets
• Special situations investments with clear time
horizon and catalyst for reaching intrinsic value
• Often capped upside, but opportunities to earn
high rates of return on annualized basis in low-risk,
high-certainty situations
• Returns are uncorrelated with broader market and
provide hedge against market volatility
Examples
Merger arbitrage, liquidations,
bankruptcies, spin-offs
Investing Characteristics
Focus on securities that are ignored by
the broader market, often with little or no
analyst coverage. Typically small to mid- At the 2001 Berkshire shareholder meeting, Warren Buffett
cap stocks talked about his approach to investment research:
“When I started, I went through the manuals page by page.
Bottom-up fundamental financial analysis I went through 20,000 pages in the Moody’s industrial,
and lengthy due diligence process transportation, banks and finance manuals — twice.
Goal: Turn over every rock to find the I actually looked at every business — although I didn’t look
best opportunities that are out of reach very hard at some.”
or overlooked by institutional investors
www.valueuncovered.com • asues@valueuncoveredcom