Philosophy & Process


Philosophy

Kirr, Marbach & Company believes that companies with above average growth prospects and below average valuations offer the highest potential for superior long-term performance. We seek to have a competitive advantage by focusing on the inefficiencies created by corporate restructurings and special situations. We have taken a consistent, disciplined approach that is time-tested and repeatable.

Idea Generation

Investment Process

Analytics– we look at numerous things including:

 

Compelling Valuation

  • Price/Earnings
  • Price/Sales
  • Price/Private Market Value
  • Enterprise Value/Free Cash Flow

Effective/Ethical Management

  • Integrity and Competency
  • Ownership of Stock
  • Building Shareholder Value
 

Strong Financials

  • Leverage
  • Returns on Invested Capital
  • Free Cash Flow Generation
  • External Financing Needs

Market Inefficiencies

  • Limited Wall Street Recognition
  • Out of Favor short-term reasons
 

Decision Making

  • 2:1 Upside to Downside Ratio
  • Probability of Successful Outcome
  • Cash Availability
  • Relative Attractiveness of Other Stocks in the Portfolio

Catalysts

  • Management Changes
  • Restructuring
  • Insider Buying
  • Cost Cutting
  • Growth Initiatives
 

Portfolio Construction

  • 35-45 holdings
  • Targets starting positions of 2-3%
  • Turnover averages 25 to 35% annually
  • Bottom-up approach with little regard for index weighting

Risk Monitoring

  • No individual issue exceeds 6%
  • No sector exceeds 30%
  • Proprietary EXPROR constantly monitors expected upside and downside

Self Discipline

  • Sell position when the price target is achieved
  • Sell the position if there are better opportunities
  • Sell position if the catalyst fails
  • Reduce positions when fundamentals falter, but catalyst is intact