We emphasize risk-adjusted returns
Professional portfolio management dictates that you should not take any more risk than is necessary to achieve your financial goals. Investors can delude themselves into thinking they are achieving great returns only to discover they were taking excessive risk. As Warren Buffet so eloquently stated, “Only when the tide goes out do you discover who’s been swimming naked.”
Three elements of investing that we covet are liquidity, transparency, and control. Investments that are difficult to turn into cash without penalties or pain (think annuities, limited partnerships, etc.) are not part of our investment world. Investments that lack all three elements MUST offer a much greater potential return. Pardon our cynicism, but if it sounds too good to be true . . .
Each investment is viewed in the context of the overall risk it adds to the portfolio. It is our focus on risk, rather than return, that separates us from many in the industry.
We manage in-house for a reason
We invest predominantly in individual securities and all of our research and analysis is done in-house. Avoiding the added layer of fees charged by investment “products” (like mutual funds) makes it easier to achieve expected returns. Over a long period of time, your number-one enemy against getting expected returns is “cost.” The more you are paying in fees, the more difficult it will be to achieve your goals. Additionally, individual security selection gives you greater transparency into what you actually own and allows for customization of the portfolio to meet your risk objectives.
Knowledge is power
As fundamental investors, we conduct thorough research to develop a comprehensive understanding of the securities in which we invest. Our opportunistic, flexible, valuation-based approach often leads us to take contrarian positions; however, we study long-term trends and keep them at the forefront of our decision making. We prefer quality, dividend-paying equities that provide downside protection and we are intentional about the credit quality and duration of our bond portfolio.
