Typically, most value oriented investment firms have been associated with either a Deep Value investment approach or a Relative Value conviction. The latter focused on valuing companies relative to peers at that particular moment in time, while their deep value cousins have been rooted in finding companies at their intrinsic or breakup values. The relative value camp has been known for higher turnover, more top-down, sector driven style. In addition, relative value managers typically try and determine whether a company is over or undervalued by comparing its Price/Earnings or other ratios with comparable companies within that particular sector or industry. The Deep Value camp is typically looking, bottom-up, for beaten down companies where most others have lost interest.

At BirdRock, our focus is on an absolute value approach that borrows techniques from both the deep-value and relative value schools. It's an alpha-driven style that is bottom-up and fundamentally driven, but not a deeply discounted or "deep-value" philosophy. It's also not a pure relative value selection process in that we are not simply making comparisons to other firms. It's focused on solid companies trading at a discount, but not necessarily a deeply troubled discount. Our belief is not to mirror the benchmark, but to select the best companies we can find throughout our universe of candidates that are trading at attractive valuations coupled with good fundamentals. By giving ourselves a more modest discount with which to work from, we are able to select from a larger universe of financially sound companies and thereby minimize the "value traps" sometimes inherent to a deeply discounted philosophy. Because our selection universe is much larger than a deeply discounted model, we also have the ability to diversify the portfolio. This diversification enables us to mitigate against the concentration typically illustrated in a deep value portfolio, but not too diversified as to mirror the benchmark.

Our risk management process allows us to minimize downside volatility as we typically employ a process-oriented sell discipline. At BirdRock, this includes a discipline of selling stocks not only when they reach their target value, but when other red flags arise prior to a price target being hit. This could be potential litigation, an important consideration especially for small cap companies; the loss of an important revenue source; frequent management turnover; customer concentration and too many off balance sheet items. This is an important distinction from Deep Value managers, whose strategy is commonly to average down on declining positions. As such, the turnover for our approach is typically higher than a Deep Value strategy, but less than the typical Relative Value manager.