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Value Investing Live Recap: Chip Rewey 2022 Update

Key takeaways and questions

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Mar 30, 2022
Summary
  • Rewey discussed his small/mid-cap strategy and market outlook.
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GuruFocus had the pleasure of hosting a presentation with Chip Rewey, chief investment officer of Rewey Asset Management.

In 2018, Rewey became an investment advisor representative and formed Rewey Asset Management (RAM) through an SEC-registered investment advisor. In 2021, he established Rewey Investment Management as an independent registered investment advisor in the state of New Jeresy.

Rewey brings 31 years of value investing experience from leading buy-side financial institutions, including

Third Avenue Management (Trades, Portfolio), Cramer Rosenthal McGlynn and Sloate Weisman Murray and Co.

At Third Avenue, Rewey led the 'Value Equity' strategies as the lead portfolio manager of the "flagship" Value Fund, lead portfolio manager of the company's Small-Cap Fund and lead manager of the 15 to 20-name concentrated "Best Ideas" strategy.

Prior to joining Third Avenue, Rewey was senior vice president and senior portfolio manager at Cramer Rosenthal McGlynn, LLC, overseeing the smid, mid, large and all-cap value investment strategies, as well as the concentrated 10 to 20-position strategies.

Prior to CRM, he was senior portfolio manager at Sloate Weissman Murray & Co., where he worked directly with the founder on research and portfolio construction. He began his career as an associate at Smith Barney Shearson.

He earned his MBA at Duke University and graduated magna cum laude from Boston College.

Rewey holds a chartered financial analyst designation and is a member of the CFA Society of New York and the CFA Institute.

Watch the full stream here:

Key takeaways

Rewey kicked off his presentation with a brief review of his career and investment philosophy. He emphasized that while there is no perfect strategy in the market, he focuses on long-term capital appreciation and risk management by investing in a concentrated number of small and mid-cap stocks.

He also noted that the portfolio is built on companies that leverage three investment pillars- downside risk management, ability to grow and valuation.

Rewey then transitioned to share how the stocks he discussed during his last appearance in 2020 have performed, saying they both “were good” for him. The first was Weyerhaeuser Co. (

WY, Financial).

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As for Regis Corp. (

RGS, Financial), Rewey said he exited the position after a good gain during the meme stock craze. Since then, it has fallen to $2.19.

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Rewey also discussed his thoughts on the market currently and the trends he has observed.

Stocks

Two new stocks Rewey said he likes currently are Mayville Engineering Co. Inc. (

MEC, Financial) and Ultra Clean Holdings Inc. (UCTT, Financial).

Mayville, a metal fabricator based in Indiana, provides parts for the commercial vehicle, construction, powersports, agriculture, military and other end markets. Rewey said the pandemic and supply chain constraints have interrupted its operations. The stock was over $20 in June of 2021, but has fallen to under $10.

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Semiconductor equipment manufacturer Ultra Clean could benefit from more chip production coming back to the U.S. The stock has recently pulled back to the $40 range after hitting highs of around $65.

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Questions

Several questions Rewey answered were in regard to Mayville and Ultra Clean, but other viewers were curious about his thoughts on GrafTech International Ltd. (

EAF, Financial). He said the graphite electrode manufacturer has a lot of potential. However, since it is the only U.S. company that operates in this niche market, a lot of steel analysts who follow it do not know much about the business, which has caused the market to not recognize its value.

Another attendee asked how he overcomes the challenge of selling a stock too early versus holding it for greater gains in the future. To that end, Rewey replied every investment has upside and downside potential. He likes to consider that companies are fighting for a spot in his portfolio as he wants to make the best use of his capital. If he feels an investment is not generating a good enough return based on the position size, valuation and risk assessment, then there are plenty of other opportunities out there.

Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
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