Investment Style
The Firm’s basic investment style is to seek absolute returns, i.e., independent of market benchmarks, net of fees and costs of all types (including inflation and taxes), with a long-term time horizon. The Firm’s investment style is driven by the following core beliefs:
Investing with a long-term time horizon increases focus on the factors that matter most to create long-term value, for example, sustainable competitive advantage
Investing with a long-term time horizon decreases focus on transitory business problems that matter less in the long term – except as they may temporarily depress a stock price and create an opportunity to buy
Investing for the long term should help reduce the drag that capital gains taxation places on “active” management
Investing with an eye to market benchmarks could distract from serving the long-term financial needs of clients
The end goal is returns net of fees and costs of all kinds. Thus, the Firm seeks to limit taxable events and fees
The above is a summary of the Firm’s basic investment style for the purchase of stocks and is subject to modification, supplementation and exception including for individual managed accounts and other circumstances. For additional information including where to find a discussion of risks, please refer to More Information.
Investment Goals
The Firm selects individual common stocks based on our evaluation of their ability to contribute to the key portfolio objectives of Capital Preservation, Spending Capacity and Growth, defined as follows:
Capital Preservation requires growth in nominal dollar terms sufficient to preserve the initial spending power of invested capital, and thus to offset all fees and costs, including taxes and inflation which negatively compound over time
Spending Capacity requires sufficient dividends or capital appreciation to allow the investor to withdraw a reasonable annual return on invested capital over the long term (in addition to the growth in nominal dollar terms necessary to meet the goal of Capital Preservation)
Growth is “real” capital appreciation after meeting the Capital Preservation and Spending Capacity objectives, i.e., growth in nominal dollar terms above what is necessary to preserve spending power of the initial invested capital and to pay a reasonable annual fully-netted return
For additional information including where to find a discussion of risks, please refer to More Information.
Portfolio Composition
The Firm primarily invests, at prices that it considers reasonable, in stocks that fall into one of two categories: ballast stocks or booster stocks.
A ballast stock refers to a stock selected by the Firm giving greater priority to the stock’s ability to help achieve Capital Preservation and Spending Capacity objectives
A booster stock refers to a stock selected by the Firm giving greater priority to the stock’s ability to help achieve the Growth objective
The Firm allocates capital between ballast stocks and booster stocks, which is part of the process of managing risk. The terms “ballast” and “booster” are not synonyms for value and growth.
For additional information including where to find a discussion of risks, please refer to More Information.