Towle & Co. FAQ

What is Towle & Co.?

Towle & Co. is an independent, value investment manager founded in 1981. We focus on managing concentrated equity portfolios of undervalued small and mid-cap companies with the goal of long-term capital appreciation. Towle & Co. is a registered investment adviser based in Denver, Colorado, serving a client base of institutional investors, family offices, advisors, and high-net-worth individuals. Towle has remained privately owned since inception, and our employees invests significant personal capital alongside our clients to ensure full alignment of interests. In short, Towle & Co. is a boutique investment firm dedicated to a high-conviction value investing approach that we’ve honed over four decades.

What is Towle & Co.’s investment philosophy?

Towle’s investment philosophy is centered on long-term, intrinsic value investing. This value discipline leads us to focus on out-of-favor, underpriced businesses – often companies, in our view, with established core operations may be temporarily misunderstood or neglected by the market. We are unapologetically contrarian in spirit: when others are fearful or shunning an area of the market, we investigate for opportunity. Behavioral biases and short-term thinking, in our view, create pricing inefficiencies that a patient, independent investor can exploit. Towle’s approach is fundamentally driven (relying on rigorous bottom-up research) and benchmark-agnostic (we do not manage money to mirror any index). Instead, we build our portfolios from the ground up, one stock at a time, based solely on where we find the most compelling value. Our philosophy also emphasizes discipline and patience: we are willing to hold investments to allow undervaluation to correct, and we remain steadfast during market volatility, provided our thesis on a company’s intrinsic value remains intact. Ultimately, Towle & Co.’s philosophy grounded in buying compelling value– we want to own good businesses at great prices – and holding them until the market recognizes that value. We believe this long-term, high-conviction mindset is key to achieving superior results for our clients over full market cycles.

What types of companies does Towle & Co. invest in?

Towle invests primarily in small- to mid-cap US public companies that we believe offer significant valuation upside. In practice, our portfolios tend to favor companies with market caps roughly in the few hundred million to a few billion dollars range. These are typically established businesses that, for various reasons, trade at very low valuation multiples relative to their revenues, earnings, or assets. We look for companies with strong market positions or unique assets where modest operational improvements or a reversion to normal conditions could lead to outsized earnings growth. Key sectors often represented in our portfolio include industrial manufacturing, distribution, transportation, energy, consumer products, and financial services – sectors where we frequently find cyclical or neglected companies trading at bargain prices. Overall, our ideal investment is a business with tangible assets or stable revenue streams that is temporarily out of favor – perhaps due to short-term earnings misses, economic downturns in its industry, or general market pessimism – causing its stock to trade at a fraction of its intrinsic value. By concentrating on these unloved corners of the market, we aim to uncover opportunities that others overlook, with the expectation that in time the stock price will recover as fundamentals improve.

How concentrated are Towle & Co.’s portfolios?

Our portfolios are intentionally concentrated. Towle & Co. typically owns a relatively small number of stocks. There are generally 30 to 100 holdings in our flagship strategy at any given time. We believe in high conviction investing: we would rather put meaningful capital behind our top ideas than over-diversify into too many positions. While a concentrated approach can lead to more short-term volatility (since each holding has a larger impact on performance), we view it as essential for our goal to generate differentiated, above-average long-term results.

What is Towle & Co.’s investment process?

Our investment process is research-intensive, disciplined, and repeatable. It begins with idea generation: we regularly screen the market for companies trading at low valuation multiples (for example, low price-to-sales or EV/EBITDA ratios) as a starting point. Once a potential value candidate is identified, we perform rigorous fundamental analysis – we study the company’s financial statements, earnings history, balance sheet strength, and business model. A central part of our process is evaluating the company’s normalized earning power (what level of earnings or cash flow can this business generate in a mid-cycle environment?) and the factors that have caused the stock to be mispriced. We ask: Why is this stock deeply undervalued, and what is the market missing? Often, we find that temporary issues (economic slowdowns, one-time losses, investor pessimism) have obscured a fundamentally sound company.

Another hallmark of our process is independent thinking: we don’t rely on Wall Street research or consensus views. Our team conducts our own research and studies industry dynamics. We internally debate each idea (often stress-testing assumptions and playing devil’s advocate) before it earns a place in the portfolio. Only the most compelling opportunities are selected for investment.

After a stock is added to the portfolio, our process continues with active monitoring. We track company developments, quarterly results, and any changes to our investment thesis. We are patient investors, but we’re not passive: if a company’s fundamentals deteriorate beyond our expectations or the stock price rapidly approaches our valuation target, we will adjust or exit the position. Portfolio construction is the final layer of our process. We ensure a diversified exposure across industries to avoid over-concentration in one area. Throughout the process, risk management is implicit in our strict valuation discipline – by buying low, we aim to limit downside risk.

In summary, Towle & Co.’s process can be described as locate value, analyze thoroughly, buy with a margin of safety, and vigilantly monitor. It’s a repeatable playbook that has been refined over decades, enabling us to navigate various market cycles while sticking to our core deep value mandate.

Who manages investments at Towle & Co.?

Our investment team is led by Christopher D. Towle, Towle & Co.’s President and Chief Executive Officer, who has been with the firm since 1994. Chris Towle, along with a group of seasoned portfolio managers and analysts, collectively manages the firm’s strategies. All key investment decisions are made by this Investment Committee, drawing on each member’s research and expertise. The Towle team is deliberately small and focused – we believe a tight-knit group can act more nimbly and maintain a cohesive philosophy. In addition to Chris, other Portfolio Managers include Peter J. Lewis, CFA; James M. Shields, CFA; and G. Lukas Barthelmess CFA. Each brings a depth of experience in fundamental analysis and idea generation. We operate with a team-based approach: ideas are debated internally and subjected to group scrutiny before capital is committed. Importantly, our team’s interests are strongly aligned with our clients – as mentioned, our professionals invest significantly in the same strategies we manage. This means the people making investment decisions have “skin in the game” and experience outcomes alongside our clients. We believe the continuity of Towle & Co.’s investment leadership (spanning decades) and the collaborative culture of our team are core strengths of the firm. We combine the perspective of long-term value investors with the energy of ongoing research to steward our portfolios on behalf of clients.

What investment vehicles do Towle & Co. offer, and how can investors access the strategies?

Towle & Co. offers its value strategy through multiple investment vehicles to accommodate different types of investors:

• The Towle Small-Cap Value strategy is available as an ETF (visit the Towle Value ETF website) or via separately managed accounts.

What makes Towle & Co. unique as an investment manager?

Towle & Co. stands out for its singular focus and long-standing commitment to deep value investing. Several factors distinguish us from other asset managers:

• Pure Value Discipline: Towle has adhered to a strict value strategy since the firm’s founding. Unlike many larger managers that offer a broad menu of styles, we stick to what we know best. This unwavering focus has allowed us to develop specialized expertise in uncovering undervalued stocks and has created a culture deeply rooted in value principles. Our experience spans multiple market cycles, demonstrating how our approach has played out in various environments, experience that newer or style-shifting managers may lack.
• High-Conviction, Benchmark-Agnostic Approach: We run concentrated portfolios that often look very different from the market indices. We’re willing to take significant active positions in sectors or stocks where we see value, regardless of index weightings. Towle’s willingness to “swim against the tide” is a defining trait. This means our performance can deviate from the market in the short term, but it also means we have the potential to outperform over the long term by being in the right place before the crowd (for example, buying into downturns and benefitting from recoveries).
• Alignment and Independence: Towle & Co. is independently owned and operated, it’s our firm, managing our own capital alongside our clients’ Towle employees collectively represent one of the largest clients of the firm, our strong alignment fuels a culture dedicated to continuous improvement, client service, and access.. Additionally, being independent (not part of a larger financial conglomerate) allows us to maintain an unbiased perspective and a client-centric culture. Our decisions are guided by what we believe is right for client portfolios and the long-term health of the assets, not by external shareholder demands or product sales targets.
• Long-Term Perspective: We explicitly take a long-term view in a world where many managers are pressured by quarterly results. This patience can be rare in the investment industry, but we believe it is a competitive advantage – value opportunities often require time to materialize. Our clients similarly tend to share this long-term orientation, which allows us to stay the course when others might capitulate.
• Proven Resilience and Experience: Having been in operation since 1981, Towle & Co. has navigated numerous bull and bear markets, crashes, bubbles, and recoveries. We have learned valuable lessons from each cycle, refining our process while holding true to core principles. This longevity can provide our clients with a sense of stability. The firm has remained under the same philosophy and family stewardship through generations of market conditions.
• Client Service and Transparency: As a smaller firm, we pride ourselves on high-touch client service. Our clients often speak directly with the portfolio managers and research team, getting insights into our thinking. We strive to be transparent about our strategy, holdings (to the extent appropriate), and performance, providing quarterly commentaries and updates. This level of access and openness is something larger institutions may not provide. We view our client relationships as partnerships built on trust and mutual understanding of our philosophy.

In summary, Towle & Co.’s uniqueness lies in being a focused, owner-operated value specialist with a long-term track record and deep alignment with its clients.