Strategy: Our investment strategy is to apply fundamental analysis and value investing principles along with an effective risk management program (including diversification, asset allocation, and hedging strategies) to achieve outstanding long-term investment returns for our clients.
Philosophy: Our investment philosophy is based on adherence to two of the core tenets of modern investment practice: Modern Portfolio Theory (MPT) and value investing.
Modern Portfolio Theory states that by investing in a combination of diverse (less correlated) financial assets (for example, U.S. and international stocks, government and corporate bonds, commodities and precious metals), an investor can maximize potential investment portfolio returns for a given level of risk (the “ups-and-downs” in portfolio value that most of us wish to avoid). In other words, given a desired level of expected investment returns, an investor can construct an investment portfolio with a minimal level of risk.
Value investing refers to a set of principles that has become one of the most highly regarded investment philosophies in the modern financial world. It was first developed by Prof. Benjamin Graham from Columbia University in the first part of the twentieth century. In addition to Prof. Graham, value investing has gained prominence over the years by many of the world’s greatest investors, including Warren Buffett (an early disciple of Benjamin Graham’s), Mario Gabelli and Seth Klarman.
Value investing is based on performing financial analyses of public companies (or other financial assets) to find and invest in those companies whose intrinsic or “fair values” are significantly greater than the price at which their shares currently trade. This “margin” or difference between the true value of a company’s shares and its current price may occur for a variety of reasons: A company may suffer a short-term strategic setback or have a temporary decline in sales; the industry in which the company operates might receive negative media reports; a senior manager may suddenly resign from the company etc. An over-reaction to any of these events might result in many of the company’s shares being abruptly sold, depressing the company’s share price well below what its future prospects (based on the company’s current and future profits) suggest the shares are worth. By identifying and purchasing shares of fundamentally sound companies for client accounts in such situations, we seek to obtain them at bargain prices. In doing so, we provide significant long-term potential for share price appreciation and attractive investment returns.
Process: We continuously conducts financial analyses and ultimately makes investments for client accounts only after our analyses indicate a company or a group of companies (an industry sector) is significantly undervalued on a relative or absolute basis.* After being selected, investments in client accounts are regularly monitored to ensure they continue to meet the firm’s stringent investment criteria.
Longer-term, investments that appreciate greatly and no longer represent significant opportunities, and investments that do not perform well are periodically sold off, while more compelling investment opportunities are selected as a result of our ongoing research.
* "Relative value" analysis refers to valuing a company’s shares by comparison to shares of similar companies in its industry sector.
“Absolute value” analysis refers to valuing a company’s shares by analyzing its current and projected cash flows.
