chology with fundamental analysis . The large-cap value fund he created at Hotchkis thumped its benchmark by sizable margins in subsequent years . In 2007 he left and launched Huber Capital Management , which is based in El Segundo , Calif . He wanted to be able to keep his funds small enough that he could maintain the flexibility for producing winning returns .
Perhaps size management partly explains the success of the Huber Select Large Cap Value Fund , which in 2024 outpaced its Morningstar-assigned large-value peer group for the sixth-consecutive year . As of early this year it was ranked as the second , fourth and eighth-best performing fund in its large-value category during the three , five and 10-year periods , respectively . And last year it was named by Lipper as the top equity-income fund during the prior three and five years .
Powered By Reversion
The fund typically carries 40 to 50 holdings . It ’ s a high-conviction portfolio where Huber and his team try to find outof-favor stocks they believe possess solid fundamental value . Their patient , lowturnover strategy aims to give these outof-favor holdings sufficient time to gain favor again with the marketplace .
Huber says he did a long-term study that compared the returns of high return-on-capital companies to those with low return on capital and found there was
Manager Joe Huber Age 56 no statistical difference in how they performed during a roughly 16-year period .
Understandably , most investors don ’ t want to wait around 16 years for a company to get its act together . And that includes Huber . So he and his team look for businesses with what he describes as “ decent ” balance sheets , along with good long-term assets and sustainable competitive advantages from superior brands , scale and distribution .
Such companies offer the prospect of shorter reversion patterns of three to five years . And that could translate into significant upside as Huber and his team seek to arbitrage the difference between what they think a company is worth and what the marketplace values it at . “ We believe our portfolio companies are underearning their potential ,” Huber offers .
Value Traps
Aside from Huber himself , the firm has four portfolio managers working on the firm ’ s value-based investment strategies . Each manager is an expert in one or two specific sectors , and they come up with the names and do the work in those sectors . Huber says the managers have an average of 28 years of industry experience , and all have been at the firm for at least 11 years . He notes that he serves as a peer reviewer to ensure consistency across all the company ’ s investment strategies .
The firm ’ s investment process , which
Professional Background He is the CEO and chief investment officer at Huber Capital Management LLC . Before founding his namesake firm he was a principal and research director for Hotchkis & Wiley Capital Management . Before that he was a portfolio manager and director for Merrill Lynch Asset Management and a portfolio manager for Goldman Sachs Asset Management .
Outside Interests Golf , the beach , reading about behavioral psychology , and spending time with his family ( his wife , two children and dog ).
Huber developed 25 years ago , is broken into two steps : an initial review and a detailed review . “ When you think about how alpha is generated in a portfolio , it has to come from two sources ,” Huber says . “ One is the stocks being picked that outperform , and the second is stocks that you avoid that underperform .”
He adds that the initial review ’ s goal is to distinguish between good value investments and potential value traps . One potential value trap is a business with mismatches between its cash flow and income statements . In order to parse the financials of companies with that characteristic , Huber developed a tool that reconciles the income statement to the cash flow statement , as well as the GAAP balance sheet to the replacement-cost balance sheet .
For example , a growing business that ’ s chewing through a lot of working capital as it expands might represent a short-term mismatch . In this case , the short-term mismatch is generally healthy .
In other cases , the mismatch between the cash flow and income could signal longer-term trouble . “ Those companies tend to underperform over longer time periods because the cash flow isn ’ t there to be returned to shareholders or reinvested in the business ,” Huber says .
The next step is the detailed review , which entails evaluating corporations on a sum-of-the-parts basis . As described on Huber Capital Management ’ s website , the firm values each of these components separately , and in doing so often finds interesting things about these businesses within a business , including the reversion patterns of the return on equity and the capital needs of each . Because most corporations don ’ t pro-
Portfolio Statistics
Number Of Positions 41 P / E Ratio 12.16x Std . Dev Fund / Benchmark 5.33 / 15.90 Turnover Ratio 33.40 % Net Expense Ratio 0.99 %
Portfolio stats and standard deviation ( three-year period vs . Morningstar US Large-Mid Cap Broad Value TR USD Index ) as of 12 / 31 / 24 . Turnover rate as of 10 / 31 / 24 . Sources : Huber Capital Management and Morningstar .
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