We are value investors and we are research-focused. The core equity portfolios which we manage are high active-share and low turnover, typically consisting of between 15 and 25 individual stocks. We invest in companies which we want to own for the long term and do so after doing extensive analysis and research. If you are a wealth management client (individual or family), then we may invest your assets in a passively-managed (capitalization-weighted index) equity portfolio and fixed income portfolio in addition to (and in some cases in lieu of) an actively managed equity segment. We do this to accommodate your risk tolerance and liquidity needs.
We seek to purchase stocks when they are on sale, or trading below what we believe to be their intrinsic value. We determine intrinsic value using quantitative models which may involve a given company’s net-asset value and anticipated cash flows or dividends. We believe that the price paid for a security is as important as, if not more important than, the quality and attractiveness of the security which we are purchasing. Our idea generation process consists of running quantitative screens to create our opportunity set, on which we then perform qualitative, in-depth analysis. We aim to leave no stone unturned in our research, and intellectual curiosity is an important aspect of the process.
We attempt to capitalize on the many behavioral biases which we believe run rampant in the markets and in the economy. To quote the value investing teacher Bruce Greenwald, investors have a tendency to chase after growth stocks and speculative assets for the same reason that they purchase lottery tickets: because they are shiny objects which focus on possibilities without fully taking into account the real-world probabilities. Along these lines, we believe that security mis-pricings can and do occur fairly frequently, and that markets are for the most part rational but can become irrational at times. It is these irrational aspects of the markets which we believe present the greatest opportunities for the thoughtful and disciplined investor. As legendary value investor Benjamin Graham once said: “In the short run, markets are a like a voting machine and in the long run, markets are like a weighing machine”.