Silvercrest Asset Management (NASDAQ:SAMG) is Top Deep Value Pick from Portfolio Manager Sandy Mehta

June 25, 2021
Sandy Mehta is the Founder and CEO of Value Investment Principals, leader in deep value investment funds.

Sandy Mehta, Founder and CEO of Value Investment Principals

Sandy Mehta, CFA, Founder and CEO of Value Investment Principals Ltd. (VIP), has over 30 years’ experience in the investment and asset management industries. With a 12-year track record, VIP is focused on identifying unique deep value investment opportunities on a global basis.

Its clientele has included some of the largest as well as most prestigious money managers in the U.S. and Europe.

In 2015, Mr. Mehta founded Evaluate Research, his third entrepreneurial venture in global financial services, focusing on providing institutional quality research coverage for rapidly growing companies in the U.S. and EMs such as China, India, etc. Mr. Mehta also founded Acumen Capital Management in 2004, and incubated a long/short pan-Asia Hedge Fund with $200 million in both HF and long-only assets.

Previously Sandy Mehta was a PM of two 5-Star-rated mutual funds, including a flagship US$15 billion Global Equity Fund at Putnam Investments & Wellington Management in Boston.

In this 2,862 word interview, exclusively in the Wall Street Transcript, Mr. Mehta reveals his award winning methods for picking deep value stock winners.

“Value Investment Principals, or VIP, is an independent investment research firm.

We seek unique, deep value ideas on a global basis.

We have a 12-year-old track record. Many of the ideas that we research and we communicate with clients are ideas that nobody else actively follows. So the ideas are unique.

All have value, many with high dividends and also they have catalysts and growth characteristics.

VIP is one of three finance and investment firms that we have set up. The other two being a hedge fund, as well as another research business. And we have offices in Singapore, India, as well as in the U.S.”

One deep value example is another investment firm.

“…For example, one of the stocks that we follow is Silvercrest Asset Management (NASDAQ:SAMG). They are headquartered in New York City. This is a money management firm. It’s an investment advisory firm. They’ve had an amazing track record in all of their strategies for the past 24 years.

The stock is extraordinarily undervalued. It’s up 40%, since we got into this stock just about a year ago. The stock is trading at seven times p/e. It’s got a 4.5% dividend yield and it’s got an 18% free cash flow yield. And this company, over its 24-year history, assets under management have compounded at 31% per annum. And these guys really specialize in small cap and value investing and those strategies have really come back over the last six months. That is a huge catalyst for them.

Silvercrest has grown organically. But they’ve also made tuck-in acquisitions. They also have what they call the OCIO — outsourced chief investment officer initiative. So there are many things that they’re doing that are unique.

There are many asset management firms that are struggling because of poor performance. But this one is still, we think, relatively undiscovered with very strong performance and actual strong growth as well.”

Investment firms in China have significant growth opportunities, according to Sandy Mehta leading to their inclusion as deep value stock picks:

“Another stock is called Hywin Holdings (NASDAQ:HYW). It just recently had an IPO in March three months ago on the Nasdaq. It’s based in China. At the IPO, it had the price of $10 per share.

Today, the stock is about $8. So the stock is down 20%. And they are the largest independent wealth advisory firm in China. They also have an office in New York City.

But as the Chinese population, the high-net-worth category is the fastest growing segment of the Chinese population. And everybody, whether you’re in China or the U.S., everybody’s looking for which mutual fund in which to invest, what products to invest in to maximize your investment income.

And these guys really distribute a lot of privately sourced products. So real estate products, private equity products. That’s why they’ve been able to really grow their client base.

They just reported earlier this week on Monday 98% net income growth on 47% revenue growth for the March quarter. And the industry is only 6% penetrated in China versus wealth management advisory’s 32% penetration in Hong Kong and 62% in U.S.

This is a secular growth area.

The stock as I speak to you today is trading at a 6 p/e, 28% net cash, 18% free cash flow yield. At some point, it’s our opinion that they will likely have a sizable dividend as well.

Being listed on the Nasdaq, this is an easy way for U.S. investors to get exposure to companies overseas.”

Another China based asset manager makes the deep value cut for Sandy Mehta:

Sun Hung Kai (HKG:0086) is a niche lender and asset management company in Hong Kong and China. Despite the recession last year, they had 23% earnings growth in 2020.

The stock is now beginning to do well; it’s up 30% year to date. We still see another 80% upside.

The stock is extraordinarily cheap and that’s why we like to talk about it. It’s trading at 0.5 times price to book. It has a 3 p/e and it’s giving a 6% dividend yield.

It’s a theme in terms of our investment style. We like to be paid while we wait. And these guys are doing a lot of good things in terms of setting up the company for future growth.

They’ve had a positive transformation disposing of their brokerage business and they’re adding fund management.

We think that despite the strong growth last year, there’s a lot more growth going forward for the company as well. For a 3 p/e, a 6% dividend yield, it’s just extraordinarily cheap.”

Sandy Mehta also sees deep value in luxury goods manufacturer.

“Another one is Movado (NYSE:MOV), which is based in New Jersey. They have their origins in Switzerland. So obviously, it’s a well-known watch brand. And what’s happening now, despite the global recession last year, and COVID still a concern globally, there’s really a boom in global luxury partially because maybe the stock markets have done well globally.

So companies that are listed in Europe such as LVMH (OTCMKTS:LVMHF), they own Louis VuittonKering (OTCMKTS:PPRUF) which owns GucciRichemont (OTCMKTS:CFRHF), Cartier — those stocks are all trading at 30, 35 times earnings. They’ve all had very strong March quarter results.

Movado is a stock that is trading at a 6 p/e for a $30 stock, they have $8 per share in net cash and if you look at Swiss Industry Association data, watch exports out of Switzerland are booming, particularly to places like Asia and China.

This stock has risen above 40% since when we got into it, but it’s still about 40% from its five-year highs. And I think it’s really a beneficiary of strong demand for luxury products.

While its peer stocks are trading at record highs, this stock still has a long way to go, we think. We see at least 80% upside from here.”

Get more deep value top picks from Sandy Mehta by reading the entire 2,862 word interview, exclusively in the Wall Street Transcript.

Sandy Mehta, CFA, CEO

Value Investment Principals Ltd.