Not all value strategies are created equal. Some work great in backtests, but fail in the real world. Others are based on simplistic valuation metrics that ignore critical elements like debt, cash flow quality, or business fundamentals. This week’s featured strategy, The Acquirer’s Multiple, is designed to overcome those limitations by looking at stocks through the lens of a private acquirer or activist investor. It was developed by Tobias Carlisle, a noted expert on deep value investing and founder of Acquirer’s Funds.
Carlisle’s approach is built around a central insight: stocks aren’t just tickers or abstract numbers—they’re ownership stakes in real businesses. A rational buyer of a company would want to know not only how cheap the stock is, but whether the business generates reliable profits, carries manageable debt, and is fundamentally sound.
At its core, this strategy uses the Acquirer’s Multiple, a valuation metric calculated as:
Enterprise Value ÷ Operating Earnings
(where enterprise value includes debt and excludes cash)
This multiple looks beyond surface-level price-to-earnings ratios and considers what a buyer would actually pay to acquire the entire firm, net of cash, relative to its true business earnings.
Filtering for Value and Quality
Before even applying the Acquirer’s Multiple, the strategy uses a quality screen to eliminate “value traps” – companies that might look cheap but are actually deteriorating businesses. This includes filters for:
- Earnings revisions (excluding firms with falling forecasts)
- Low cash flow relative to reported earnings
- Excessive debt levels
- Very weak price momentum
Only the highest-quality stocks — those in the top decile of this composite — are eligible to move on to the valuation stage. From there, the strategy selects the cheapest 5% of stocks based on the Acquirer’s Multiple.
The result? A concentrated portfolio of deeply undervalued, high-quality companies that could be attractive to strategic buyers, private equity firms, or activist investors.
Performance: Feast or Famine
Like many deep value strategies, The Acquirer’s Multiple can be volatile. When value is out of favor, the strategy struggles. But in value recoveries or periods of market dislocation—when investors flock to distressed or unloved names—it can deliver outsized returns.
Notably:
- It soared in 2009, returning 153.9% vs. 23.5% for the S&P 500.
- After a tough stretch in 2022–2024, it is the top-performing Validea portfolio in 2025 YTD, up 25.7% compared to just 2.8% for the S&P 500.
- It has had years of significant underperformance, like 2015 (-31.9%) and 2018 (-35.5%), reinforcing that it’s a strategy best suited for patient, long-term investors.
The model’s strong recent run has help it claw all the way back to close to the market’s return since inception.
* Returns are model returns and do not reflect actual trading. Full performance disclaimer
Current Portfolio: Where the Deepest Value Lies
The current portfolio is filled with international stocks, particularly in emerging markets and cyclical sectors—places where value tends to hide when large-cap growth dominates the headlines. Below is the list of current holdings:
| Ticker | Company | Date Added | Score | Start Price | Latest Close | Return |
|---|---|---|---|---|---|---|
| SSL | SASOL LTD (ADR) | 09/13/2024 | 100% | $6.91 | $4.85 | -29.81% |
| CYD | CHINA YUCHAI INTERNATIONAL LTD | 04/25/2025 | 100% | $15.49 | $21.11 | 36.28% |
| EGY | VAALCO ENERGY INC | 03/28/2025 | 100% | $3.81 | $3.75 | -1.57% |
| ATHM | AUTOHOME INC (ADR) | 05/23/2025 | 100% | $24.84 | $25.92 | 4.35% |
| EQNR | EQUINOR ASA (ADR) | 05/23/2025 | 100% | $23.82 | $26.39 | 10.79% |
| NVAX | NOVAVAX INC | 05/23/2025 | 100% | $7.25 | $7.15 | -1.38% |
| FINV | FINVOLUTION GROUP (ADR) | 08/18/2023 | 100% | $5.14 | $8.91 | 73.35% |
| CVAC | CUREVAC BV | 02/28/2025 | 100% | $3.10 | $5.60 | 80.65% |
| ZIM | ZIM INTEGRATED SHIPPING SERVICES LTD | 01/31/2025 | 100% | $17.80 | $16.57 | -6.91% |
| RERE | ATRENEW INC (ADR) | 01/31/2025 | 100% | $2.65 | $2.75 | 3.77% |
Case Study: Why ZIM Makes the Cut
To understand why these companies qualify, take ZIM Integrated Shipping (ZIM) as an example:
- Sector Check: ✔️ Not in Financials or Utilities
- Quality Filter: ✔️ Passes metrics like forward earnings trends, cash flow health, and low debt
- Valuation Test: ✔️ Has one of the lowest Acquirer’s Multiples in the database (1.2), placing it in the 1st percentile
Final Thoughts
The Acquirer’s Multiple isn’t for the faint of heart. It requires discipline, patience, and a deep belief in the value investing process. But for those willing to lean into volatility and think like a buyer, the rewards can be significant, especially when the market is rewarding value stocks and strategies.
Further Research
Looking to dive deeper into value investing opportunities and stock analysis? Explore these Validea tools and resources:
- Validea Guru Stock Screener – Find fundamentally attractive stocks across multiple valuation metrics.
- Validea Guru Analysis – In-depth analysis using strategies inspired by Buffett, Graham, Lynch, and other investing greats.
- Top S&P 500 Stocks Based on Guru Scores – See which S&P 500 names rank highest across our composite guru models.
- Model Stock Portfolios – View real-time portfolios based on individual guru strategies.
- Investment Education & Videos – Short videos explaining valuation metrics, investment philosophies, and how to use our tools.
