When properly analyzed, uncertainty can create a compelling investment opportunity.

In taking a page from academia, we believe that a sound investment philosophy should begin by making certain assumptions or postulates about the market, and then seek to derive logical conclusions that follow these assumptions.

In describing the Cambiar philosophy, we begin with the observation that the capital markets price businesses and the sustainability of their future cash flows in an efficient manner over the longer term. Yet over shorter time horizons, investors are prone to misgauge both the negative and positive news flow around industries and companies. Subsequent responses often lead to exaggerated stock price movements, which can create opportunity for active equity managers like Cambiar.

As value investors, we attempt to identify investment opportunities with attractive risk/return profiles – where the probability for loss of capital is modest, while the potential for outsized return is high. Such scenarios are the result of valuation sensitivity at the point of purchase, as well as a non-consensus assessment of the true economic value of the company over a forward 1-2 year timeframe. While not pure contrarians, we are willing to look at situations that are temporarily out of sync with the aggregate market’s current interests if we believe the issues causing the current valuation compression are transitory in nature.

The search for asymmetric risk-return opportunities, as illustrated in the following graph, is the result of Cambiar’s intensive, in-house research process.

Another hallmark of the Cambiar philosophy is portfolio concentration. The preference to manage a more focused portfolio of best ideas is primarily a by-product of our high hurdle rate, which is mandatory for stocks entering the portfolio. This higher return requirement results in a portfolio of our analysts’ highest conviction ideas, which Cambiar believes is the best way to consistently generate excess returns for our clients over the course of an investment cycle.

This disciplined investment approach has been in place at Cambiar since 1973, and is consistently applied in all of our product offerings.