Fully Integrated Credit and Equity Research Process
Managing high yield corporate debt portfolios makes us better equity managers, and managing equity portfolios makes us better high yield corporate debt managers. Integrating credit and equity research allows us to construct a more comprehensive mosaic and identify inefficient security pricing.
Complete Capital Structure Analysis®
Our investment professionals are capital structure generalists, meaning they are responsible for understanding the entire capital structure of the companies they follow. Understanding company liquidity, bank loan and bond covenants, maturity walls, equity issuance or repurchase potential, and refinancing opportunities provide unique insight into the under or overvaluation of debt and equity.
All ideas are vetted by the entire team before ultimately being approved for a portfolio. While there is individual accountability in terms of investment style leadership, final approval of new ideas flow through teams of senior investment professionals.
All of Penn Capital’s investment styles flow from a well defined universe: U.S. Dollar denominated micro-to-mid capitalization equity and high yield corporate debt. There is a high level of crossover between the high yield and the micro-to-mid capitalization equity universe, allowing for an efficient process of coverage for our investment team.
Fundamental Bottom Up Research
Back to focusing on what we can control, we focus the majority of our time on assessing the ability of a company to execute their business plan and create value in their enterprise. We seek well run companies that can maintain a competitive advantage through all parts of the economic cycle. Once our fundamental financial and business analysis is complete, we place a high degree of emphasis on assessing management talent, their alignment of interests, and their record of executing winning business strategies.
Our risk management process includes quarterly communication with company management, utilization of portfolio risk management software, continuous dialogue amongst portfolio team members on holdings and macro events, and aggressive trimming of positions on strength and unexpected downside weakness.