Proxy Voting (and Reading)

Proxy voting season is winding up around here at Triad. We invest in individual securities for our clients and vote proxies on their behalf.

We have arranged for each company to send us their materials the old-fashioned way, via mail, so we can read both the proxy statement as well as the annual report.

The proxy illuminates the relationship between pay and performance, and helps us to identify “owner-operator” situations where an executive’s compensation and ownership aligns their interest with that of shareholders.

We have seen a wide range of compensation arrangements, starting with one where an executive’s annual compensation was higher than the value of his ownership stake. The other end of the scale is represented by a leading online retailer that we follow. The CEO owns about 17% of the company but takes home a salary under $100,000.

Our investment process seeks to identify these types of “owner-operators”. We do this because incentives matter and there is no stronger incentive for most executives than their compensation package.

Our Top 1,000 Ideas…

ETFs have never been more popular (when someone is saying that about an investment, beware).

So, let’s look at what ETF investing is.

Investing in a portfolio of ETFs means you own very small proportions of potentially thousands of stocks. Why do you own certain stocks, and not other ones? Because they are part of an index that the ETF attempts to track. Good businesses and not so good ones. Cheap ones along with expensively valued ones.

We think that if we told a client we were going to buy them our 1,000 best ideas, he or she might start laughing.

So, we take a different approach. For stock portfolios, we seek to buy a selected group of what we see as good businesses and we are careful about how much we pay for them. In our view, we end up with a diversified approach without overdoing it.

There are many ways to succeed at investing, but this approach makes the most sense to us.

About the CFA Designation

Triad’s portfolio managers are CFA charterholders.  But what goes into attaining this designation?

The Chartered Financial Analyst (CFA) designation is offered globally by CFA Institute.  The current requirements include 4 years of qualified work experience, completion of the CFA program (curriculum and three six-hour examinations), becoming a member of CFA Institute and adhering to the CFA Institute’s Code of Ethics and Standards of Professional Conduct.

The program is distinguished by its rigor and focus on ethics.  The program curriculum is based on a Candidate Body of Knowledge established by CFA Institute that covers asset valuation, ethics, financial reporting, economics, corporate finance, and portfolio management.  Exams are offered once per year (twice per year for the introductory Level I exam).  The exam and designation is truly global – the same test is administered to all candidates, whether they are in Los Angeles or Paris.  Every year, CFA charterholders must attest that they are upholding the Code of Ethics and Standards of Professional Conduct. 

The following description from The Economist dates back to 2005 but in our view provides a good summary:

The Chartered Financial Analyst (CFA) qualification is roughly equivalent to a specialised postgraduate finance degree, including a mixture of economics, ethics, law and accountancy. It is much liked by employers in financial services. Whereas there are tens of thousands of finance degrees available around the world, ranging from the excellent to the worthless, there is only one CFA, managed and examined by an American association of financial professionals, the CFA Institute. It used to be just an American qualification. But explosive growth…has made it, in effect, a global currency.

The Economist, February 26, 2005

To learn more about the CFA designation, visit


Tired of Turkey?

I don’t know anyone who doesn’t enjoy celebrating Thanksgiving – especially the food. Each year I look forward to piling my plate with turkey and gravy, mashed potatoes, stuffing, cranberry sauce, green bean casserole and let’s not forget the pie! But soon after the meal I find myself spread out on the couch ready for a nap. Was it my overindulgence – or is turkey the culprit?

Turkey is a good source of Tryptophan. According to WebMD, Tryptophan is needed for the body to produce serotonin. Serotonin is used to make melatonin, a hormone that helps to control sleep and wake cycles. As it turns out, turkey contains no more of the amino acid tryptophan than other kinds of poultry.


According to Elizabeth Somer, MA, RD, author of Eat Your Way to Happiness, it’s a myth that eating foods high in Tryptophan boosts brain levels of Tryptophan and therefore brain levels of serotonin.

Somer says that proteins like turkey, chicken, and fish, which are high in Tryptophan, require assistance from foods high in carbohydrates to affect serotonin levels. Eating turkey alone may not send you off to dreamland. But when combined with potatoes and biscuits and stuffing, dreamland is just around the corner.

So have your turkey, Somer says, because it will increase your store of Tryptophan in the body, but count on the carbs to help give you the mood boost and the restful sleep.

The Business of Halloween

Investing can be scary. But Halloween – not so much anymore.

According to the National Retail Federation, Halloween is the second largest commercial holiday after Christmas. Halloween retail spending is projected to be $8.4 billion in 2016, a new record. Holiday spending for 2016 is projected at $655.8 billion. So it still has a ways to go. But several more Halloween records are projected to be broken this year, including the number of people celebrating at 171 million that are spending approximately $82.93 each.

So why is Halloween such a growth industry? One reason is that Halloween is a very affordable holiday. It doesn’t cost as much as Christmas or Thanksgiving and is still lots of fun. In fact, around 16% dress up their pets.



More signs of growth – temporary Halloween stores are on the rise and other retailers have expanded their offerings for the October 31 celebration. Nightclubs, restaurants, bars, even cities (Salem, Massachusetts) are cashing in by hosting Halloween events.

So the next time you hear “trick or treat,” no need to run and hide. It’s actually great news for the economy. And lots of fun.


Pause: Autumn is in the Air

We love the chautumnanging of the seasons – especially summer to autumn – the slight crispness in the air, the leaves changing color, the mass proliferation of pumpkins and of course the return of football.

The transition from summer to autumn is also a great time to press the pause button and reflect on the beauty around us. Nature presents a dazzling spectacle this time of year, but how often do we notice? In our rush to get here and go there and achieve and accomplish when do we just pause and appreciate the complexity of a tree’s roots, the multitude of colors in the fallen leaves or the way a deeply-inhaled breath of fresh air is so invigorating.

Before winter’s grayness and shorter days set in, take a look around you. Go for a walk. Stare out the window. Rake up a few leaves. Relish the newness of the season before it is gone for another year.

Thoughts on Doha

Oil market hopefuls were under the spell of magic happening at this past weekend’s Doha meeting of major global oil producers…It’s silly to think that any meeting and subsequent agreement between OPEC and non-OPEC producers will have any long-term impact on oil markets.  Here’s why.

The oil market got out of whack because supply and demand got out of whack…and the only thing that will create market equilibrium is a rebalancing of supply and demand…anything artificial (such as a production freeze) will not work…if suppliers did decide to reduce production the price would likely rise in the short-term, which would encourage some producers to cheat and increase production.

In addition, higher prices would encourage the high-cost non-OPEC producers to crank up production…And guess what, that would lead to greater supply, which ultimately leads to lower prices.  The only way to get to an equilibrium price is for the high-cost producers (some U.S. shale and conventional producers, North Sea, Mexico, Canadian Oil Sands, and Russia) to curtail production.

It hasn’t happened yet as producers are playing the equivalent of the game of “chicken” trying to hold on and squeeze whatever positive cashflow can be had from fields, while waiting for their competitors to drop out of the game.

Problem is, when everyone is thinking and doing the same thing, it takes longer for reason to prevail over hope.  They aren’t earning enough to replenish depleting wells. So, eventually the cashflow from barrels starts to dry up, and the losers drop out, shrinking supply and bringing balance back to oil markets.  Free markets work, but like many things in life, it can take longer than you’d think for the process to come full circle.

High cost producers today are pumping furiously to generate enough cash to stay alive. That’s all. It’s like the joke about the guy who jumps from a 20 story building. When he reaches the 5th floor he says “so far I’m fine”. The only things that matter are economics: long term costs and demand. Prices will be set based on these 2 things.

On a related note, how logical is it for oil producers (that means you Saudi Arabia) to drive prices down 70% to correct an oversupply of roughly 2%?  These oil producers have given up 70% on prices to regain 2% of worldwide volume.  Makes no sense.  A better approach would have been to gradually increase supply, pushing prices down by perhaps 20%, which would have caused the highest-cost producers to reduce production, and the imbalance would have been rectified gradually over time.  Instead, OPEC has overshot supply by a wide margin.  The risks now are production declines so severe that we could see a price spike at some point in the future.  And that doesn’t benefit the Saudis or other major producers, who are most interested in stable oil prices over the long-term, so that their customers have some predictability about prices, and don’t seek energy alternatives.

A Financial Valentine

Whether you’re happily married, single and searching or just don’t want to think about it, Triad wishes you a Happy Valentine’s Day. We’d also like to take this most romantic time of the year to remind you of some important, non-romantic financial basics that you should make sure you are discussing with your family on a regular basis.

Some families may have trouble broaching these subjects, but a clear financial plan should be one of the foundations of your relationship and will save much heartache in the future.

Financial Accounts – Everyone should have a clear, concise list of accounts, including checking, savings, mortgage, credit cards, investments, retirement, etc. Keep it in a safe place where your family will know to look for it. We recommend the book Get it Together: Organize Your Records So Your Family Won’t Have To by Melanie Cullen and Shae Irvine.  Keeping track of financial accounts helps make investment decision making easier.

Account Beneficiaries – No matter your age or marital status, everyone should designate beneficiaries for all of their accounts. Naming beneficiaries for all your accounts can help avoid legal complications in the event of a death. If you’re not sure if you have designated beneficiaries, contact your financial institution.

In Case of Emergency – Again, no matter your age, be prepared for the unexpected. Everyone should have a financial plan that includes a will or living trust that provides instructions for the disbursement of your assets after death. A power of attorney and/or health care proxy are instructions in the event your become physically or mentally incapacitated.

Location, Location, Location – Some families keep their financial documents in different locations. Tax returns, marriage and birth certificates, insurance policies, wills, health care proxies – make sure your family knows where they can be found. We recommend keeping directions your family will need in a secure but accessible place like a personal safe. And don’t forget to provide a list of passwords!

While these aren’t very romantic ideas, they are crucial and need to be discussed once a year or as changes occur. What better time than Valentine’s Day to have a financial heart-to-heart discussion with your nearest and dearest!