Our Investment Approach
As our investment philosophy states… successful investing begins and ends with ONE goal: The growth of capital over the long-term. This begs two questions 1) Why is this, and 2) What is our approach to achieve success?
The Why: Inflation
Last 10 Yrs: 2.28%
Last 25 Yrs: 2.63%
Last 50 Yrs: 4.19%
Annual Average: 3.30%
For the money you are not spending today, you need to ensure it grows at a rate greater than inflation. Period. If your capital does not grow, you lose purchasing power (i.e., money)!
The What: Our Investment Approach
Our investment approach falls in line with our philosophy of “long-term” growth…. If we wish to have our capital grow over the long-term, it is only natural to us to make investments for the…. You guessed it: Long-term!
We simply follow this path to make investment selections and ultimately create our investment portfolio:
Invest in American Businesses
There is no reason to complicate investing… For long-term investing there is no better place to invest.
We Invest In Public Securities
It is in these public markets; whether it’s bonds, stocks, preferred stocks, or options; that we are able to find great American companies to invest in for the long-term.
Company Centric Approach
Publicly Traded, American-Based Companies is our investment “pool.” We quickly reduce these thousands’ of entities, to 100’s through our identification process.
For more than two decades, this process leads us to companies that 1) We can easily understand & 2) We can envision will exist for a long period of time
One-Company At A Time Analysis
We analyze each company on it’s own, but from two perspectives:
Qualitative Research: A crystal clear understanding of a company’s long-term sustainable growth;
Quantitative Analysis: Understand an entity from a financial perspective.
- Business Understanding
- Industry Analysis
- Company Position With In Industry
- Realism of Growth Objectives
- Operations Analysis
- Management Experience Review
- Economic Value Added Analysis (EVA)
- Financial Statement Deconstruction
- Realism Of Growth Objectives
- 3rd Party Forecasts
- Company Capital Structure Review
One-Company At A Time Analysis Result:
- Attributes That Minimize Competition
- Historically Creates EVA
- Clean Financial Statements
- Capital Structure That Maximizes ROC Vs. COC
- A Clear, Long Runway Of Growth Due To Company & Industry It Participates In
Once We Find A Company That Checks All Our Boxes, We Seek To Buy It At A Discount To It’s Fair Value. Sometimes This Takes Patience…A Lot Of Patience!
After It’s All Said & Done:
- We Find Many Investments In “Boring Industries” (The blue triangles)
- Balanced Off With Investments In Higher Growth Investment Themes (The orange triangles)
- 100 – 200 Companies Make It On Our Watch List (At Any One Time)
- Result Is A Good Balance Of Companies To Meet Our Capital Growth Objective, Both Via Stock Price Appreciation and Dividends
The Result of Our Investment Approach…The Investment Portfolio
The Premise Of Our Investment Portfolio
Less portfolio activity with the right companies is far superior to more activity with the wrong companies. We attempt to limit risk by selecting what we believe are the best companies, and by managing portfolio risk by diversifying our separate company holdings.
We do not confuse short term market volatility with investment risk. We define risk as the permanent loss of capital. The overall trend of the stock market is up and we are more than willing to absorb some short-term volatility for long-term gain.
Our Investment Portfolio Can Be Summarized As Such:
- Centered On Doing What’s Right By The Client,
- Minimize Expenses While Maximizing Returns, and
- Drawing On History & Experience (Regardless Of The “Investment Du Jour” Per The Industry)