A Time-Tested Approach to Money Management

Our team of professional portfolio managers and analysts employs a time-tested approach to the markets that is embodied in the management records of successful investors worldwide. This approach has five key ingredients:

Establish a Clear Understanding

What does your money mean to you? We take the time to understand your objectives and ask the questions that are too often overlooked. Without a firm grasp on your needs and tolerance for risk, it is impossible to design a sound portfolio.

Once we have a thorough understanding of what you are looking for, we establish investment policies for your managed account. These policies are the rules, guidelines, and strategies that will be used to meet your own unique and specific needs.

A Business-Like Approach

We view managing your money as a business, and it means taking a different look than the typical broker or financial planner. Over a time period of greater than 5 years, an owner (stockholder) historically receives a demonstrably higher return than a lender (bondholder). This higher level of return to the stockholder does not happen in the neat, straightline fashion of bond returns, but instead involves greater risk of loss of principal and greater market volatility.

We understand and assume these risks in managing portfolios, but do so in a way that allows you to sleep at night. For clients with a shorter time horizon or a need for current income, we offer a customized, balanced portfolio which combines stocks and fixed income securities.

Manage Risk: Buy Value.

The greatest risk you face as an investor is paying too much for the stocks in your portfolio. When we evaluate companies, we avoid buying into high-priced rosy scenarios which may or may not come about. We would rather own shares of an established company selling at a discount to market averages.

In our minds, the most important determinant of return is price. It means avoiding the shares of often highly successful companies selling at stratospheric price/earnings ratios and scooping up the shares of often mundane, but promising firms selling at bargain prices. This is how we define “value” investing.

Control Costs

The next ingredient in our management style involves keeping costs as low as possible. We limit portfolio turnover to 15 to 20 percent per year, on average. This level of turnover equates to a 3- to 5-year investment horizon. It behooves us, as long-term investors, to hold positions long enough to allow the people, ideas, and business concepts in which we have invested to come to fruition.

Furthermore, it often takes time for the market to recognize a good thing. A company can generate reasonable returns for long periods without gaining the recognition it deserves in terms of a higher price/earnings ratio. When we do trade, we do it very inexpensively. Through our custodial relationships we strive to keep transaction costs as low as possible.

 

Monitor Results

We report to our individual securities clients each quarter, letting you know in both dollar and percentage terms how your account performed for the previous three months. We also keep a running tally of performance over the entire history of the portfolio, and we compare our performance against a market benchmark such as the S&P 500 Index. All results are reported net of management fees and transaction costs. At a glance, you know how your account is doing.