White Oak Capital believes that investing in exceptional firms at attractive prices yields outsized returns over time. A great company is well-managed, has a scalable long-term opportunity, and delivers better returns on incremental capital, as well as a proven track record of execution and governance. Valuation analysis is an important part of their study. According to the firm, White Oak Capital conducts in-depth valuation analysis to find firms that are selling at a significant discount to their real worth.
They hunt for firms whose cash flow or earnings projection, and hence intrinsic value, differs considerably from what the market has put into the shares. Valuation is appealing when the current market price is significantly lower than the underlying value. White Oak Capital prefers to focus on economic free cash flows above accounting cash flows and assigns a terminal value based on the company’s success.
The objective of the investment approach is on long-term absolute returns. Instead of betting on macro, they offer a basic yet effective investment strategy of selecting and investing in companies.White Oak Capital often avoids enterprises with poorer qualities, such as poor corporate governance, low incremental returns on capital, or those that suffer technology obsolescence risk. Poor corporate governance may take many forms, including syphoning of cash or value, stock price manipulation, unethical business activities, or misaligned interests, and low returns on new capital might result from excessive industry competition or capital misallocation.