Strategies

Balanced

Download Balanced Strategy Profile

A concentrated (35-45 securities) portfolio of small, mid-size and large capitalization companies, as well as selected bonds. The absolute and relative return prospects between stocks, bonds and cash are continuously evaluated. Equities are invested in the same manner as our Concentrated All-Cap Equity strategy – from our 3,500 stocks, 200+ companies are identified after fundamental review of profitability, competitive positioning, financial strength and the alignment of management with owners. From our stocks, investments are made only when the stock is priced at a minimum 50% discount from our estimate of future business value. Stocks are sold as they close the gap between price and value, when business fundamentals deteriorate, and when better perceived investment ideas become available.

A concentrated (35-45 securities) portfolio of small, mid-size and large capitalization companies, as well as selected bonds. The absolute and relative return prospects between stocks, bonds and cash is continuously evaluated. Equities are invested in the same manner as our Concentrated All-Cap Equity strategy – from our 3,500 stock universe, approximately 250 companies are identified after fundamental review of profitability, competitive positioning, financial strength and the alignment of management with owners. From our 250 stock investment universe, investments are made only when the stock is priced at a minimum 50% discount from our estimate of future business value. Stocks are sold as they close the gap between price and value, when business fundamentals deteriorate, and when better perceived investment ideas become available.

Equity Asset Allocation Process

We continually evaluate ABSOLUTE and RELATIVE return prospects among stocks, bonds and cash. Our first preference is stocks when both a sufficient return PREMIUM over bonds and cash and an expected 15% annual return over 3-5 years seem achievable. When bonds offer similar risk-adjusted return potential as stocks, we allocate more to bonds. When neither offer attractive return prospects, we hold cash pending better opportunities.

Equity Investment Process

Over years of study, we have established a universe of 200+ companies. Companies within this universe must qualify based on our review of their business and management. These companies have durable and stable competitive positioning with attractive profitability profiles. We seek “owner-operator” cultures and incentives in our review of management. We continually review the universe and companies are added and removed over time.

We analyze company reports, SEC filings, industry and trade journals, company presentations, competitors, suppliers, customers and other sources to assess the business and management. We don’t rely on the opinions of “Wall Street” analysts to make our investment decisions.

We compare our estimate of future value with the current stock price, and will invest only when we believe a minimum return of 15% per year over 3 to 5 years is achievable. If current prices offer expected returns under 10% per year we will begin selling and wait until new opportunities develop.

When we find investments meeting our stringent criteria we concentrate in these rare, compelling ideas. We seek a combination of high return and low permanent loss potential.

A strict sell process is important. We reduce and sell positions when the gap between market price and estimated business value closes or disappears. We don’t hesitate to sell if fundamental business problems arise or if a materially better investment idea appears.