Sandy Mehta is the Chief Executive Officer and Chief Investment Officer of Evaluate Research Ltd. He has over 30 years of investment experience and has previously founded investment adviser Value Investment Principals — HK/India — and hedge fund Acumen Capital Management in Boston.
Mr. Mehta has previously been a portfolio manager for two 5 Star funds, a $15 billion flagship Global Equity Fund and $2 billion small-cap fund, at Putnam Investments and Wellington Management Co., both in Boston. He also has been the head of a global research team and incubated a $300 million small-cap fund at Putnam.
He was the first analyst ever hired by legendary value manager John Rogers at Ariel Capital in Chicago, and also worked with Arnie Schneider and John Neff at Wellington.
In this 2,115 word interview, exclusively in the Wall Street Transcript, Mr. Mehta makes the case for his portfolio management philosophy.
“…The focus is providing research coverage on companies that are otherwise being ignored by Wall Street and the bulge bracket brokerage firms.
Our firm has grown well over the last four years, and with some of the secular trends that are happening globally — where the asset management companies are under pressure because of indexation and lower fees, and then the brokerage firms are under pressure because of MiFID II, and you’re seeing analysts get laid off — we think a firm like Evaluate Research really provides a valuable service to the investors and the companies as well.
…For the vast majority, 80% of the companies we cover, we are the only people following the stock. We do very detailed work. When we do an initial report on a stock, it’s a 30- to 40-page report.”
Some specific examples are overseas:
“Mr. Mehta: I would mention just a couple more ideas. One is Ozner Water International (HKG:2014). This is a leading supplier of water and air purifiers in China. Again, this is an environmentally friendly secular growth space.
They have a vast distribution network of over 7,000 distributors throughout China, and that network has grown at 20% CAGR over the past three years.
And the penetration of water purifiers in China is only 13%, whereas in developed markets it’s more like 70%. So we expect 20% revenue growth going forward the next three years, 30% earnings growth, and the stock is trading at just 0.9 price to book, and it’s an 8 p/e, four times EV to EBITDA.
And one final idea I will mention is Sun Hung Kai Limited (HKG:0086). This is a niche investment in a finance firm; it has mortgage lending and consumer lending. It’s got 50 years of operating history, and again, they are in growth areas.
The stock is very, very undervalued today, at just 5 times p/e, 0.5 tangible price to book. The company is buying back stock, they bought about 7% of their stock last year, and this is on top of about a 6.5% dividend yield that they have.
So in the last 12 months, they have returned about 14% of their stock price to shareholders, which is one of the highest levels of capital return in the world.”
Get all of Mr. Mehta’s top portfolio picks by reading the entire 2,115 word interview, exclusively in the Wall Street Transcript.