Midwest Investment Management LLC is one of the region’s fastest-growing investment management firms. We offer our services to a wide variety of clients, including:
- Government pension plans
- Corporate pension plans
- Taft-Hartley plans
- Not-for-profit organizations
Our analysts and portfolio managers have a long-term, and proven, track record. Over their careers, they have provided investment management services to many large U.S. corporations and employee pension plans.
At Midwest Investment Management, we remain steadfast in our conviction that successful investing requires diligence, control of risk, and a comprehensive, intimate, perspective on the corporations whose stocks are held in client portfolios.
Perhaps the most “visible” attribute of Midwest Investment Management is its management structure. The “investment management” team operates separately from the “client service” team, permitting each group to serve our clients with maximum effectiveness, by concentrating on what they do bestwhether it’s portfolio management, investment research, or presenting quarterly data to our clients at their offices.
Although our staff is separated into two primary departments, most of our Partners have worked together for decades, under all market conditionsincluding the “bear market” of 2000-2003 and other challenging markets, notably 1974-75 and 1983-84. Particularly impressive were their investment results during the 2000-2003 market decline.
In addition, the firm’s Partners who are directly responsible for investment decisions hold the distinguished Chartered Financial Analyst (CFA) title, the industry’s highest professional standard for investment knowledge, standards, and ethics.
Midwest Investment Management employs a Large-Cap Core Value style. We emphasize equity investing and buy stocks according to three tenets:
- Quality companies. To us, “quality” means a strong industry position, healthy finances, and superior profitability. These traits are strong indicators of a company’s ability to prosper, stay competitive, and grow.
- Sustainable growth. We search for corporations that have demonstrated sustainable growth and have potential for continued growth well into the future, barring unforeseen circumstances. We seek firms that can maintain an above-average dividend growth.
- Value price. To determine fair value, we use five models:
- A short-term earnings model using historical median valuations;
- An internal rate-of-return model that incorporates ten future years of earnings;
- A relative dividend yield model;
- An historic price-to-book value model;
- A future-cash-flow model, to calculate a fair value based on asset profitability and growth.
The final results are combined into a single price that we call “fair value.”
We then attempt to buy the stock at a 20% to 30% discount to that price. This creates a margin of safety. Of course, we hope to capture an upward march in value as the company grows its business, profits, and dividends.
Our research methods
We believe a value price is only one aspect of the stock-selection process for our clients. So we augment our efforts with ongoing researchboth qualitative and quantitativeto complete the process.
Although computer programs can provide us with “quantitative” research about companies and industry groups, we view “qualitative” research as a critical piece of the stock-selection puzzle. In fact, we view qualitative research as being equal to, or sometimes more important than, quantitative research.
Our qualitative research takes the form of on-site visits to corporations whose stocks are held in client portfolios. We meet one-on-one with senior-level executives, and our discussions with them are typically extensive and candid. Sometimes, we tour the company’s offices, manufacturing plants, or other facilities. These tours provide us with an opportunity to talk with employees and learn more about the company’s products or services.
Over the years, information gathered at on-site meetings and company facilities has proven valuable because it enabled us to:
- Identify qualitative drivers inside a companysomething that quantitative data alone can’t provide;
- Better understand why a company has been successful, and determine if it has a durable advantage for the future.
- Assess managements’ plans and thinking for the future, and even help us determine if a stock should remain in client portfolios.
Some of our visits have uncovered surprises that either confirmed or cast doubt on our previous thinking.
Today, many corporations provide streaming-video “conference calls” on the Internet as a medium for their executives to “converse with” stock analysts and investment managers. Although these video conference calls are convenient and sometimes worthwhile, they are no substitute for looking straight into the eyes of a corporate executive while he/she answers our questions.
For decades, we have made it a standard practice to conduct on-site meetings with corporate managers because we believe there is no substitute. And so, on-site visits will continue to be an important component of our investment management process. After all, our clients’ money is at stake!
In addition to our on-site research, we process and analyze extensive quantities of data which we obtain from several of the nation’s foremost statistical research organizations.
We utilize several Internet-based services that provide instantaneous access to thousands of additional research reports about industries or companies. Another critical component of our investment management process is the use of “interactive analytical databases” that we use to calculate our own estimates of corporate earnings, long-term growth, and cash flow. We perform detailed “comparative analysis” of competing companies and “sensitivity analysis” to determine the impact that factors such as changes in prices, unit growth, interest rates, or capital structure might have on the earnings or rates of cash-flow growth at a company.
We invite your inquiry
Midwest Investment Management has the proven experience and state-of-the art resources your organization needs to successfully achieve its investment goals, including:
- Long-term institutional investment management experience under all market conditions, good and bad.
- A disciplined Large-Cap Core Value style of investment management, which emphasizes equity investing only in quality companies;
- Ongoing qualitative and quantitative research to search-out quality companies.
- The staff and resources to provide the level of service, consultation, and reporting require by your organization.
For more information, contact our Managing Partner, Norman F. Klopp, CFA.
Phone: (216) 830-1135
Fax: (216) 830-1159