McGavock Dunbar Explains the Top Picks from Vulcan Value Partners

November 28, 2017

McGavock Dunbar is a Principal and the Equity Analyst at Vulcan Value Partners. Mr. Dunbar joined Vulcan Value Partners in 2010.  Vulcan Value Partners was founded by C.T. Fitzpatrick in 2007 after he left Southeastern Asset Management in Memphis, where he served as a Portfolio Manager for 17 years. “We opened to outside investors in 2010, and that’s when I joined the firm. Today we manage over $14 billion across five strategies, with most of the capital in the Large Cap and the Small Cap strategy.”

In this exclusive interview with the Wall Street Transcript, McGavock Dunbar details his firm’s investing philosophy.  “We have just one guiding strategy, and that is to identify really high-quality businesses that have inherently stable values, and then wait for an opportunity to buy them at a discount to intrinsic value. We are value investors, but we don’t look for cheap stocks. Instead, we spend our time looking for good businesses with inherently stable values and follow them very closely. Then we wait for the market to give us the opportunity.”

The porfolio positions itself based on these relative value situations.  “We are constantly trying to minimize the weighted average price-to-value ratio of the portfolio. We are often trimming names with higher price to values and redeploying that capital into companies with lower price to values, all while maintaining a very high-quality bar.”

A few examples show the philosophy in action.  “So let’s use Boeing (NYSE:  BA) as an example. As one of the best performers in the S&P, we sold that position when we thought it reached our estimate of intrinsic value, and we’ve been allocating that capital to more discounted names with a greater margin of safety. Some examples of those are in U.S. drug distribution industry, including McKesson (NYSE:MCK)AmerisourceBergen (NYSE:ABC) and Cardinal Health (NYSE:CAH). The stock prices for these companies have not performed well. However, we think they are very good companies and competitively entrenched with stable intrinsic values.”

To see more of the portfolio’s top picks, read the entire interview at the Wall Street Transcript.