Investments

 

Specialists in deep-value investing  

What type of stocks does Paul Hill look for?

Ideally I try to find undervalued growth stocks that have strong balance sheets, scalable business models, tried and tested technology, an expanding customer base and very little debt. What’s more, they’re well placed in a long term markets – like the internet or healthcare – which means they can grow very rapidly… Making them prime candidates to rebound, or even be taken over!

But let's be crystal clear about this … there’s no magic formula to finding them. I’ve spent 25 years doing it, and I’ve never yet found a substitute for hard work. You see, valuing a company – and potentially profiting from it – is an intensely complicated exercise. Involving a combination of thorough reearch, analytics, judgement, experience and flair. This is as much an art as it is an exact science.

So before I buy a share, I have to be absolutely positive it has a good chance of bouncing back into a profit… That means one thing – hard graft. Get ready for some jargon… It means digging deep into a firm’s accounts, trawling through Securities and Exchange Commission filings, looking at EV/EBITA multiples, PE and PEG ratios, along with building my own financial forecasts… I’ll regularly work a 60 or 70 hour week – chasing down debt covenants, looking at balance sheets, cash-flow, credit ratings… I’ll spend hours picking through stacks of 10-K and 10-Q documents, examining any litigation changes, and upcoming regulation issues…

Often, it means arranging a private meeting with a firm’s CEO or Financial Director. Because when you really delve deep into a business, you start to notice things… Things the wider market has missed… It might be a new contract that secures future income…a new product or a potential takeover… or even a simple change in management. Anything that suggests the company will perform much better than the market valuation gives it credit for. Because that’s what this comes down to – value. Sure, it may sound dull… But it works. It’s made a lot of money in the past…and with some luck, it’ll make money in the future.