Our Investment Philosophies and Values

~ Continuously learning from the markets and using this knowledge to help others, defines our passion. ~

In his book The Intelligent Investor, Benjamin Graham states; "The essence of investment management is the management of risks, not the management of rewards. Well-managed portfolios start with this precept."  We strongly embrace this philosophy.

Defining and managing risk is the foundation of our planning process.  Conventional academic “wisdom” posits that the stock market is completely efficient and all available information is captured in the current price.  We humbly disagree.  One need look no further than the NASDAQ tech bubble in 2000, or the housing bubble and subsequent financial crisis of 2008, to find glaring examples of market inefficiencies.

Above all, we respect the message offered by the Markets themselves as they reflect the conventional "wisdom" of the collective. To paraphrase Keynes; “The markets are moved by animal spirits, and not by reason (and) they can remain irrational longer than you can remain solvent.” 

Conventional wisdom also dictates that over time the stock market always increases in value.  Thus, if you have a long enough time horizon, the risk of permanent loss of capital is eliminated!  There is truth to this, however the assertion is based on past history.  Its span includes a world war where vast resources were spent on science, research & development.  It saw a subsequent “baby boom”.  The phenomenal growth in population and productive technology fostered a golden era for our economy during a time when we had no global rivals.  Our economy today is perhaps better characterized by unprecedented levels of debt and over-consumption; by stock repurchases instead of spending on research; by a focus on the next quarter rather than on the next decade; all in a world rife with global competition! 

This is not to say we’re doomed, nor that history is irrelevant!  Everything goes in cycles though, and the cycles of greed, fear and hope have defined our existence for millennia. 

"Human beings don't really change.  An analyst without historical perspective can do more damage than a good historian without analytic skills." - Michael Shaoul

Mankind is resilient and motivated to explore, create and advance.  “Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command...(which) necessarily, leads him to prefer that employment (of capital) which is most advantageous to society...He is led by an invisible hand..." - Adam Smith

Ultimately then, it becomes an exercise in discerning a balance between risk and reward.  Risk is not a "bad" thing, per-se, but it must be intelligent risk, and the expected returns must be commensurate with the magnitude of risk exposure undertaken.  

To achieve this, we utilize elements of fundamental analysis, technical analysis, and an acknowledgement that we are at all times, students of the markets.  Maintaining our sense of humility is paramount, secure in the knowledge that markets will attempt to inflict the maximum amount of pain on the maximum amount of people.  The remedy is disciplined adherence to risk control, to the parameters of our models, while remaining continuously open to the message from the markets themselves.