Institutional Investor's Alpha Magazine - July/August 2008 - (Page 27)

$4.2 billion in assets for an elite list of clients that includes Soros Fund Management, Swiss private bank Pictet & Cie and Permal Group, a $37 billion fund-of-funds ﬁrm that was acquired by Legg Mason in 2005. “There are several things I like about Alex,” says former Merrill Lynch & Co. vice chairman John (Launny) Steffens, who has been an investor with Atlantic Investment since 2001, when he founded Spring Mountain Capital, a New York–based fund of hedge funds. “He is a very disciplined Dutchman. He knows the things that he knows, and he knows the things that he doesn’t know. There are a lot of people who think they can do what Alex does — it doesn’t look very complicated — but it’s not that easy.” Roepers’s taste in investments is driven by his experience working at conglomerates Dover Corp. and ThyssenBornemisza Group during the 1980s. He looks for companies that are leaders in their industries, that have recurring and predictable revenue and cash ﬂow and that are not dependent on commodity pricing or prone to technological obsolescence. The half dozen or so stocks that are the heart and soul of Atlantic Investment’s various portfolios — the “core longs,” as Roepers dubs them — are companies that typically supply the industrial world with products like shovels for coal-mining equipment and engine parts for aircraft. However disparate the mix of products, every company in Atlantic Investment’s portfolios is ﬁnancially sound and largely well run, pays a dividend and — what seals it for Roepers — has hit an apparently temporary snag that has depressed its share price to a level he feels is dirt cheap. Once the problem is corrected, which can take one to three years, Roepers is equally disciplined about selling his position, exiting when a stock is trading at eight or nine times free cash ﬂow. Then he repeats the process, buying his core longs if and when they are very cheap again — something he did recently with Precision Castparts Corp., a Portland, Oregon– based company that makes castings and forgings for the aerospace, defense and power generation industries. Roepers and his highly disciplined style of investing may be just the thing for today’s troubled markets. Atlantic Investment has repeatedly demonstrated the ability to put up positive returns during tough times. From 2000 to 2002, when stock prices suffered severe declines in the wake of the dot-com bust and the S&P 500 dropped nearly 45 percent, AJR International and Cambrian each soared more than 75 percent. During last year’s tumult, both funds rose more than 20 percent, compared with the S&P 500’s 5.5 percent gain. Like most hedge fund managers, Roepers lost money on his investments this June, as investors across the globe scrambled for the exits, spooked by the tenuous state of the U.S. and European economies, soaring commodities prices, the struggling housing market and the likelihood of more fallout from the credit crisis. But, as he told investors during his June 17 presentation, he remains sanguine about his ﬁrm’s prospects: “We live in the space between where fear gives us a fantastic company at a cheap price and where a more reasonable price would bring it.” THE MIDTOWN-MANHATTAN headquarters of Atlantic Investment Management reﬂect Roepers’s interests. Viewed from the inside, the glassed-in ofﬁces — with teakcolored furniture, white walls and gray-green carpeting — look like the cabin of a modestly decorated yacht (quite unlike the spartan Swan 45 racing machine that Roepers recently skippered from Newport, Rhode Island, to Bermuda). There is little clutter, apart from stacks of research reports in the analysts’ ofﬁces. Photorealist paintings by Steve Smulka in the halls depict images of canning jars and faucets, the kind of basic but necessary products made by the companies in which Roepers invests. The Atlantic Investment team — it’s easy to think of the mostly young and ﬁt analysts as Roepers’s “crew” — includes 13 equity analysts with business degrees from the world’s top universities, impressive employment records and linguistic skills to match. Collectively, they are ﬂuent in Dutch, French, German, Japanese, Mandarin, Russian and Spanish in addition to English. Three of the four analysts who cover European equities grew up abroad but now live in the New York area. But amid all the talent, Roepers is the only portfolio manager. “I am the guy who pulls the trigger,” he says. “Some people would like to see four or ﬁve managers, but this is the way it is.” With so much riding on so few stocks, Roepers and his analysts pursue research with painstaking devotion. Roepers spends an average of 70 days each year abroad on business and attends some 200 meetings with the top Atlantic Investment analysts Kristian Gevert (left) and Michael Meek prowl the globe for cheap stocks with good businesses. JULY/AUGUST 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 27

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - July/August 2008

Institutional Investor's Alpha Magazine - July/August 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Mr. Big Goes Small The Good Guys: Adopt This School! Interview: Man's Great Hope Cover Story: The Gentleman Activist Strategies: The New Bankers Profile: Staying Alive Research Center: The Best of the East The Asian Sensations Alpha Bytes: Into the Light Unhedged: Commentary: Speculating on Washington

Institutional Investor's Alpha Magazine - July/August 2008

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