Philosophy

Alatus Capital has developed a “modern value investing” approach that strives to combine a fundamental company valuation methodology with a disciplined and thorough portfolio construction process. The objective is to provide investors with superior risk-adjusted returns by compounding capital over the long term and outperforming equity indices, with less risk and volatility.

Through rigorous bottom-up fundamental analysis, Alatus seeks to capture significant capital appreciation by identifying companies with potential “inflections” in profits and cash flow generation over a two-to-three-year time frame. Alatus mitigates risk by investing in companies generating strong free cash flow, operating in industries with positive dynamics and growth prospects and benefitting from substantial competitive advantages. Alatus primarily invests in European equities and believes in investing in businesses, not stocks.

We behave as part-owners of our portfolio companies.

Investment Objectives

Alatus’ objective is to provide its investors with investment vehicles compounding capital over a full business cycle (three to five years). Long-term annual returns should also be superior to the broad market averages (MSCI World, STOXX Europe 600). Alatus pursues this objective by investing in 15 to 20 compelling long-term value companies in public markets, primarily in Continental Europe. These Europe-based companies are often leaders in global niches and have substantial global exposure, while benefiting from quality corporate governance.

Alatus primarily seeks to mitigate risk and volatility by investing in companies generating strong free cash flow, offering a solid balance sheet and providing a margin of safety against permanent capital loss.

Investment Strategy

Alatus believes in investing in businesses, not stocks, and behaves as part-owner of its portfolio companies.

Alatus seek investments offering potential for significant value creation over a two-to-three-year time horizon. Through the identification and thorough analysis of business strategies and operations, the firm diligently strives to invest in companies that offer a “free option” to significant capital appreciation. Such an “inflection” in value creation can be driven by a change in strategic direction, an operational restructuring, the investment cycle of the business and/or an entrance into new markets and products. Investee companies should offer a margin of safety on capital invested without the benefits of an inflection in their business.

Free cash flow is considered the key driver of shareholder value creation. We seek to buy companies at an attractive equity free cash flow yield. We define free cash flow as recurring operating cash flow after maintenance capital expenditures, without the benefit of any future growth: it is thus cash available for shareholders’ benefit for distribution, share repurchase or reinvestment. To illustrate our objectives, if a company generates 10% of free cash flow yield every year and repurchases shares in the first year, only 90% of the company shares will be outstanding. In the following year, the cash flow yield will allow retirement of even a higher percentage of the shares. This process cannot continue for long without the stock price increasing substantially. Marginal return on capital expenditures is another driver, since the capital allocation process can create or destroy significant value.