Brian T. Kute, Principal and the Manager of Research from Johnson Investment Counsel picked the Ashland spin off Valvoline (NYSE:VVV) in this exclusive interview with the Wall Street Transcript. Mr. Kute uses a an innovative investment style in the small to mid-cap sector: “We find a lot of consistent, quality operators in cyclical industries. One of the things we like about smid cap is that there are plenty of smaller yet still undiscovered companies that fly under the radar and successfully are able to grow their businesses even if the macro environment is challenging. We seek out those types of companies.”
One such example is Valvoline (NYSE:VVV):
TWST: And what’s another stock that you like?
Mr. Kute: Yes, another one would be Valvoline (NYSE:VVV), which we’ve recently purchased. You’re probably familiar with the motor oils that they sell, but they are also having success with Valvoline Instant Oil Change, a drive-thru oil change that’s been a significant contributor to their revenues. It’s a company that was founded over a century ago, but they were spun off from Ashland last year, and now they’re an independent, publicly traded company. And it’s a company that certainly has a strong consumer brand.
They’ve been successful in increasing the mix and the complexity of the oil that they sell toward more of a premium product. As a result, their margins have increased, and they’re really seeing good growth in their Valvoline Instant Oil Change business. International is another growth opportunity for them as well.”
The experienced portfolio manager also describes how investors can participate in his stock picking: “the…SMID Cap Core approach is an institutional separate-account strategy and also available through a mutual fund called the Johnson Opportunity Fund (MUTF:JOPPX). The fund has been using this strategy and process since 2013.”