April 20, 2024

Not a Flashy Investor, Just Successful

He snapped up his 1995 Donzi motorboat after it had been repossessed from its previous owner. He made a deeply discounted, 24-hour, take-it-or-leave-it offer for a home on Long Island that had been on the market for years, only to later discover he had bought Vincent Astor’s summer home.

And while the Midtown offices of his investment firm, M. D. Sass, are appointed in rich mahogany paneling with marble tables, Mr. Sass explains that not all is as it seems. He leased the office at a fire-sale price in the early 1990s after the previous tenant, Ensign Bank, went into receivership.

“I wouldn’t have put this stuff in,” Mr. Sass, 69, growled, sweeping his arm dismissively around the room. “But I got it for nothing.”

Mr. Sass’s bargain-hunting ways extend to his investment firm, which oversees a collection of investment funds, hedge funds and private equity partnerships with $8 billion in assets.

Earlier this year, as shares for oil-services stocks like Halliburton and Baker Hughes languished, Mr. Sass added to his stakes in his flagship M. D. Sass Relative Value Equity Strategy, a group of accounts that require a $10 million minimum investment.

And this spring when the earthquake, tsunami and nuclear crisis in Japan rocked global stock markets, and insurance companies tumbled on early estimates of billions in losses, Mr. Sass again went shopping, this time picking up shares of the insurance company MetLife.

“I went in as everyone else went out,” said Mr. Sass, perched on a chair in an office filled with figures of bulls and bears. “More bulls than bears,” he notes, laughing. In the mighty world of investment managers, Mr. Sass isn’t a big dog.

He does not make bold bets like John Paulson’s gold play, which personally netted Mr. Paulson $5 billion last year. Mr. Sass doesn’t buy stock in a company and agitate management to change its ways as the activist investor William A. Ackman of Pershing Square does. Nor are Mr. Sass’s offices staffed with mathematicians or physicists designing algorithmic trading models for high-speed computers like those of James H. Simons of Renaissance Technologies.

What Mr. Sass does is real meat-and-potatoes investing. He scans the markets for companies trading at prices that he thinks do not reflect their earnings potential. He applies his accounting background to company financials to root out cash flow.

Mr. Sass entered this year bullish, betting that the economy was going to improve and that stocks were undervalued. He thinks the S. P. 500-stock index could end the year closer to 1,500 from its current level of 1,331.

Aided by a small team of analysts, including his son, Ari, Mr. Sass develops broad investment themes and then digs for companies within those sectors that are positioned to benefit.

For instance, he built up his big stake in oil-services companies in the belief that they would gain once drilling resumed in the Gulf of Mexico. He has grabbed onto generic drug makers on the notion that large pharmaceutical companies are on the verge of losing critical patents on blockbuster drugs. And his firm took a sizable position in a company that makes slot machines, an area he argues will show tremendous growth as more states hope to address fiscal shortfalls through gambling.

Mr. Sass’s style has produced an annualized gain of 7.2 percent, after fees, over the past decade versus a 5.3 percent annualized return for an index of value stocks tracked by Chicago research firm Morningstar.

His recent bets in oil-services stocks have paid off, with Halliburton and Baker Hughes both trading about 22 percent above where he bought them. Shares of MetLife are hovering at just about the same price he paid in March.

While Mr. Sass’s funds do not produce eye-popping double-digit returns, neither are investors likely to face those sort of losses either, say people who know Mr. Sass and his investment style.

Article source: http://feeds.nytimes.com/click.phdo?i=98b453520f871f15b516e92880e594d5

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