Investing in “corporate change” is the cornerstone of Iridian’s mid-cap investment philosophy. We believe that while markets are generally efficient in determining value, they regularly fail to discount the long-term strategic and investment implications of dramatic structural change in a company or industry. This process of change can result not only in a significant transformation in the financial performance of a company, but also in the way a company is perceived and hence valued by the market. Our goal is to tap into “corporate change” opportunities before they are fully recognized or valued by the market.
Our two-step stock selection process is disciplined, bottom-up, and value-based, and uses mostly in-house generated fundamental research to identify companies undergoing “corporate change” and generating large amounts of free cash flow. We do not rely on the quantitative screens used by most conventional equity managers to develop a universe of potential stock candidates; rather “corporate change” is our screen and the two steps we use to identify and value potential investment opportunities are as follows: