For this issue we had the pleasure of interviewing Carter Johnson.

Carter is the Founder and Manager of MCJ Capital Partners, an emerging alternative investment management firm with a small cap bias.

(We have more interviews being published soon, so make sure to add your email address to the list so you don’t miss any).

Hi Carter, thanks so much for taking the time out to do this interview. 

Can you please tell readers a little more about your background and why you decided to launch MCJ Capital Partners?

What makes the firm different from the rest?

Certainly - outside of studying finance in school, my background doesn't follow much of a traditional finance route.

I started my career as an owner / operator running a small service based company that my business partner and I founded.

Eventually we sold that and I moved to Colorado. Before I launched MCJ Capital Partners I spent time in forensic accounting and valuation work for private markets. 

I launched MCJ Capital Partners because I wanted my capital invested a certain way and I genuinely enjoy the investment process. For me, it's enjoyable to learn about different companies and industries.

Regarding the question of what makes the firm different, as it stands today I think there's three components that make MCJ Capital Partners a little different from others:

1. I do a lot of fishing in smaller ponds and in corners of markets that are less pursued by larger more traditional shops. I love being able to buy companies that larger investor bases can't wait to own as the company moves up in size. I also love the inefficiencies you see on valuations as you go down in size.

2. I spend quite a portion of time on serial acquirers which I find is a type of company that deters some investors and firms. Some folks love serial acquirers, others won't even consider a company that has acquisitions as a core part of the growth strategy.

3. My process comes from an owner / operator approach. Running a business where trucks would break down, dealing with the ebbs and flows of working capital, just the general experience of running a business was so valuable.

   To me that process gave life and meaning behind the numbers you see on spreadsheets. And because I view what I do at MCJ Capital Partners as buying pieces of businesses, having an investment approach that is rooted in an owner operator perspective adds a layer of color that is a little different than that of a pure analyst.

What does your ideal investment look like?

I’m looking for companies that have stability and durability in their underlying business and clear advantageous reinvestment opportunities that I can understand. And when I find those, I want them to have a long runway to keep reinvesting that operating cash flow.

In a nutshell, I want high quality businesses at the smallest size that I can find them. 

Where are you finding good ideas at the moment?

I love the opportunity sets I'm seeing overseas. There's a lot of high quality companies that have come down in valuation, specifically in the Nordic region, Netherlands, Germany and the UK. 

Can you talk about two specific companies in your portfolio you're bullish on?

Two companies in our portfolio that I really like at the moment:

💡 Creightons (CRL)

The company is a small personal care and beauty product manufacturer out of the UK. It's got one of the best management teams I've come across for it's size.

The company is currently trading at less than the value of its brand portfolio, giving you its private label and contract manufacturing businesses for free.

In addition, management is doing a good job of growing the brand portfolio both organically and through acquisitions.

If you've got patience, Creightons is the type of business I like to own.

💡 Lifco AB (LIFCO)

A lot of people are familiar with the serial acquirer Lifco and their Chairman Carl Bennet. I bring it up because it's one of those Nordic companies that has come down in valuation.

It's a great business that just keeps getting better. The dental distribution business is growing stronger with a greater mix of in-house manufactured consumables.

The other two areas, Demolition & Tools and System Solutions have phenomenal niche end markets.

I think the architecture of the entire organization from the M&A infrastructure to the way the solutions group is organized is really set up with a long runway to keep cranking small deal size acquisitions.

It's a great business that is trading at a valuation a bit more reasonable than what we've seen in recent years.

Not a steal by any means, but seldom are great companies offered at fire sale prices. 

What are the red flags you look for that will cause you to sell down a position? 🚩

For me, the easiest reason to sell is when a thesis completely breaks down and it's understood what caused the break down.

I love when those happen because I can clearly identify that I was wrong and sell our ownership position.

It's much more difficult when I have to play the game of relativity in asking "how wrong might I be, or how detrimental is this point to the overall thesis."

The other red flag I look for is when something occurs that is so out of left field it tells me I don't understand the business as much as I think I do.

If I don't understand it I don't want to own it, because I won't have conviction in it when it matters most. 

Thanks once again Carter. Where can readers find out more about MJC Capital Partners?

Absolutely, readers can find out more at mcjcapitalpartners.com - Feel free to reach out with any additional questions. 

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Disclaimer

This interview is for informational and educational purposes only, and should not be seen as investment advice. Please do your own research before thinking of investing in any company mentioned.