Proprietary Screening and Sourcing:
Red Oak couples proprietary screening with a diligent in-house research process to identify and evaluate companies which are not followed by institutions. Red Oak is typically the first institution to invest in its companies, and through independent due diligence, it acquires an “informational edge” versus the market (which does not know about target companies). Coupled with a deep value investment discipline and active liquidity management, these form the key drivers to the business model.
Value Investment Discipline:
Red Oak focuses on low NOPAT and free cash multiples in predictable businesses which have low correlations versus the broader markets and economy. Red Oak’s performance correlation since inception is under 30% versus. all major indices.
Required Catalysts Include:
Active use of free cash flow to return capital, pay dividends, repurchase stock, pay down debt, or make accretive acquisitions. Significant free cash generation at underlying companies has resulted in a high percentage of Red Oak’s investments to date being acquired at premiums above market.
Use of activism to improve governance, offset insider conflicts, and affect shareholder’s best interests.
Red Oak employees sit on five portfolio company boards.
We make the best ideas count – top five names comprise 40-75% of the Fund via a concentrated strategy.
We utilize shorts (small and mid caps) to reduce beta-adjusted net exposures and reduce the Fund’s risk profile.