MAHOGANY Approach

Investment Principles

OUR VISION & GOALS

LONG TERM STOCK RETURNS ARE DRIVEN BY EFFECTIVE CAPITAL MANAGEMENT
We invest in companies, led by management teams that have a track record of generating strong returns on the capital supplied by their investors. We also target well managed companies in industries entering increased consolidation and decreased regulatory risk.
CORPORATE TURNAROUND
We also invest in companies where there is a visible path to higher returns on invested capital. We target companies where proven management has taken over and has moved to restructure the business and reduce a bloated cost structure.
FOCUSED PORTFOLIOS
The best type of diversification stems from constructing a portfolio of focused investments that meet the strict fundamental characteristics we seek and where earnings and cash flow are influenced by distinct factors unrelated to other stocks in the portfolio.
Absolute Return Focused
We don’t believe in benchmarks. Our long term objective is to produce tax efficient, positive returns for our investors. Preservation of capital in both good and bad markets is the cornerstone to our investment philosophy.
Contrarian Spirit
Investing with “the herd” produces average returns. We believe a willingness to be “out of consensus” produces above average long term returns.
Macro Overlay
We combine our bottoms up approach to stock selection with a top down macro overlay that we use to reduce drawdown risks and target capital exposure at the sector level.

Investment Philosophy

MAHOGANY’s investment philosophy is founded on a view that companies led by superior corporate leaders generally deliver above average shareholder returns. Our investment approach seeks to identify undervalued assets and brands that are led by managers that have a consistent track record of generating superior returns on invested capital.

The MAHOGANY Growth Fund is designed to be a cost efficient investment product that focuses on generating long term capital appreciation by investing in stocks that are expected to generate cash flow growth over and above the expected long term cost of capital.

In order to achieve our investment objectives, we have constructed an investment framework, identifying investments where:

  • Intrinsic value > Market value as determined by MAHOGANY’s internal analysis
  • Management has a superior return on invested capital track record
  • Entering a period of secular growth
  • Has an expected series of catalysts that are expected to unlock value
  • Attractive risk adjusted valuations

Investment Philosophy

The MAHOGANY investment framework also identifies corporate turnaround scenarios where:

  • Company owns a stable of strong but mismanaged brands and assets
  • Proven management team has replaced the previous regime
  • Rationalization of the companies cost model
  • Management has taken steps to rejuvenate a previously dominant brand

The Importance of ROIC

Return on Invested Capital (ROIC) provides a clear and accurate picture of how efficiently a company is deploys investor capital and whether or not its competitive positioning allows it to generate returns greater than its cost of capital.

ROIC matters. Companies and management teams that deliver superior long term returns on invested capital, tend to deliver superior capital returns over time.

By focusing on the ability of the corporate leadership to generate consistent and reliable returns with investor capital, we can more effectively estimate the intrinsic value of the company and determine whether the investment meets the rigorous standards of the MAHOGANY Capital Identification Process.

Investing in companies with improving ROIC provide a number a number of benefits such as but not limited to:

  • ROIC is a quantifiable way to gauge management performance
  • Measures performance against all forms of capital (debt + equity)
  • Strong capital returns fuel sustainable cash flow, dividend and buyback growth
  • Cash flow growth protects against the negative impacts of inflation and deflation

Our Process

MAHOGANY Asset Management takes a CEO based approach to portfolio management by assessing each investment opportunity at an individual level and then determining whether each investment works to increase the overall potential return on invested unit holder capital while not materially adding to incremental risk.

Our Process

As a firm we employ the MAHOGANY Capital Identification Process to identify investments in companies that have:

  • Intrinsic value per share > current share price
  • Improving industry fundamentals
  • Simple business models
  • Predictable free cash flows
  • Dominant in their industry
  • Durable brands
  • Improving cost structure

Work With Us

MAHOGANY Asset strives to be your investment partner.
We seek to understand your investment goals and needs. Please contact us to discuss.