Buying Potentially Great Companies at a Discount
Selecting quality companies in which to invest—among the thousands that exist worldwide—can be a daunting task. Randall Dishmon, portfolio manager of the Oppenheimer Global Value Fund, believes that great companies stand out regardless of where they operate. Yet he always sticks to a strict price discipline when evaluating the landscape for investment opportunities.

  • The mission of the fund, as he sees it, is to make money with money—and help investors achieve their goals.
  • Dishmon’s investment philosophy is based on the premise that every good investment starts with buying something for less than it’s worth in order to achieve an attractive return. His approach is not to own a company just because it is growing, but rather to invest in discounted companies that exhibit large gaps between their trading price and what he deems the overall value of the business.
  • His investment process entails fundamental, bottom-up stock selection while answering three key questions: Is a particular business worth owning, ever? At what price? And is its management team working for shareholders? Within a universe of about 67,000 companies, Dishmon looks for roughly 700-800 companies he’s willing to own at a certain price. He then conducts a more in-depth examination to pinpoint the 50 or so companies in which he wishes to invest.
  • A drop in the stock price would lead Dishmon to be even more aggressive in his purchases, since he focuses on the overall value of the business to begin with. He focuses on operating cash flow in his valuation assessments, because it is a difficult metric to manipulate, and because he believes that those assessments could withstand the vagaries of sentiment and emotion, which shift throughout market cycles.
  • Dishmon’s portfolio-construction process tends to focus on weighting the portfolio by upside and downside conviction, with a bias toward quality. He sees clear, indisputable benefits to diversification, though he believes that one only needs about 20 stocks to get the majority of diversification benefits.
  • He looks at risk management not through the perspective of volatility metrics or performance versus the benchmark, but rather strictly through the act of investing, or “investment risk”: the risk of buying the wrong company at the wrong price and aligning oneself with a management team that doesn’t treat shareholders well.

For more, read the Ticker Magazine feature titled “Buying Great Companies at a Discount.”