Craig Burger, CFA
Director of Equity Research
Covington Capital Management – Assets Under Management $2 Billion
AFG Client Since 2007
1). Can you tell us a little about Covington Capital (Who you serve, philosophy?)
Covington is a ten year old independent, employee-owned RIA. Our clients are HNW, Multi-Generational wealth as well as Endowments and Foundations, but the bulk of our clients are taxable and interested in tax-efficient and risk-efficient investing. We also work hard to coordinate our efforts with our client’s accounting and legal professionals to provide a more consistent investment management solution.
2) You have been an AFG client for over 10 years, what sets AFG apart from other equity research providers?
I was using AFG at my previous firm and helped incorporate it into our investment process here at Covington. Given that we are looking to invest in companies that have the consistent quality metrics in terms of sales growth, margin strength supported by a history of making good capital allocation decisions, the ability to use a tool like AFG to help translate accounting metrics into economic performance metrics is really important. We model every stock that we own in our equity strategies and the Value Expectations and Pro-Forma Builder allows us to build in and test our underlying assumptions as we consider what the value drivers are in a particular name. Is pricing driving or hurting margins? How sensitive is the intrinsic value to revenue growth? It is also nice to be able to get a quick snapshot look at EBITDA trends, balance sheet strength, asset growth rates and Management’s track record of past growth and where it came from.
3) Has AFG helped you reach better investment decisions?
I think it has clearly helped, particularly in the Investment Committee dynamic of what constitutes the investment thesis in a particular stock. By focusing the conversation on what a particular set of value drivers may be and then imbedding them in a model it also helps to address the ongoing, and sometimes more difficult question of when to sell something. Has it reached its expected value or has it fallen short and why?
4) How does AFG’s research process and applications help the investment teams save time?
I like that fact that the underlying data is refreshed every week as data becomes available and that when we are looking at companies across sectors and across industries we are doing so in a consistent manner, measured to a common metric and is a company generating positive economic margins and thereby creating value for its shareholders and what are the elements driving that value creation (or lack thereof).
5) Any additional comments about AFG?
I am fortunate to have known the Founders of AFG since the early days of the company. I appreciate the rigor of the process and their commitment to continuing to invest and consider ongoing elements of improving the process as well as methods of delivering it those of us who use it.