Competitive Strategy
“Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.” – Michael Porter
At Riverwater Partners, our foundational belief is that employing a responsible investment lens enhances traditional value investing by promoting resilience, capturing inefficiencies, and improving return potential. As it relates to value investing, we define Value as paying a fair price for the responsible deployment of physical, human, and financial capital in pursuit of superior returns. Our process is thoughtfully executed through our unique stewardship approach, security selection, and portfolio construction.
Enhancing Value Investing Through Deliberately Different Portfolio Construction
Riverwater’s portfolio construction is an active team process that embraces diversity of thought by requiring unanimous agreement for buy/sell transactions. Riverwater seeks to invest in companies whose value is not yet recognized by the market and hold them as they mature through the small- to mid- market cap spectrum. This approach is designed to reduce turnover and volatility. The focused portfolio requires discipline to choose the best companies in each sector relative to each strategies’ defined benchmark. Stock selection drives nearly all relative performance. This allows a focus on minimizing idiosyncratic risks while being aware of macro implications. All components of portfolio construction are designed without regard to outwardly-defined style boxes. Riverwater’s deliberately different approach seeks to capitalize on our definition of value toward the realization of our clients’ real world and financial objectives.
Discovering Superior Businesses & Exceptional Management Teams
Riverwater consistently applies its The Three Pillar Approach™ which serves as the foundation for understanding each investment candidate. Our research approach illuminates the opportunities present in superior businesses that leverage their competitive advantages and are run by exceptional management teams with a proven history of prudent capital allocation and economic alignment with shareholders. We invest in companies trading below their long-term intrinsic value. Through successful application of this approach, the strategy invests in unique high-quality assets in each sector that serve to generate superior returns and maximize downside protection.
Making the World a Better Place
Our mission is “to make the world a better place by growing wealth through sustainable investing.” Through this lens, and as fiduciaries, we consider portfolio candidates’ attention to environmental, social, and governance (ESG) factors because the risks and opportunities posed by the ever-changing world have the potential to materially (positively/negatively) impact portfolio returns.
Using a proprietary ESG database dedicated to small- and mid-cap companies, we exploit inefficiencies in the nascent ESG journeys of small-cap companies to discover opportunities. Additionally, we engage with companies toward improvement on salient ESG factors. Materiality matters. We exclude industries that, in our view, are not essential for global prosperity. The accompanying map illustrates that climate risk is omnipresent. Yet, unlike many responsible investors, we consider fossil fuel indispensable and invest in energy companies focused on reducing their environmental footprint and/or facilitating the transition to cleaner energy solutions. Simultaneously, we favor companies whose business by their very nature offers a societal or environmental benefit.
Join Us in Our Mission
To learn more about our strategies and research team, contact Matt Drvaric, Partner.