“If I knew I was going to live this long I would have taken better care of myself.”
– Mickey Mantle
Capital Preservation: Our goal is to preserve, protect, and grow the purchasing power of client capital over time. A proper asset allocation between Equities and Fixed income is crucial to the success of each portfolio and contributes to long-term investment results.
Inflation in the last ten years was ~3%. At that rate $1 is worth ~$0.50 cents in 20 years.
- A reduction of purchasing power is a destruction of wealth
- As Fixed Income typically yields less than inflation over the long term, it is risky to one’s long-term purchasing power to allocate 100% to this asset class
- Equity markets, while volatile, have outperformed Fixed Income over the long-term and served as a hedge against inflation.
- If Equity markets did not return greater than the Risk-Free Rate over time, they would cease to exist
Long-Term Time Horizon (5+ years): Companies that allocate long-term capital wisely
produce excellent returns in good and bad economies, under any political leadership, and will produce shareholder value.
Equities: Equities are a critical component of long-term preservation and growth.
Common stock ownership provides an excellent opportunity to build and grow wealth. To
preserve purchasing power, portfolios should generally have a majority allocation of Equities, else purchasing power will be destroyed over time. We seek to purchase stocks of financially sound companies trading at a significant discount to intrinsic value * often with the following characteristics:
- Moderate and acceptable debt levels
- Global competitive advantages within their markets
- Generating Free Cash Flow in the current or near term
- Attractive Returns on Equity
- Management teams with good capital allocation practices
* Intrinsic Value is the value of an asset is determined through analysis without reference to its market price. The underlying intrinsic value of a company is the net present value of all its future free cash flows. Free cash flow is central to this analysis and in determining discrepancies between underlying value and price.
Additional Information
Fixed Income: Bonds, money markets, and cash are used to provide balance for client portfolios and to generate income to meet near-term liquidity needs.
Price Volatility vs. Permanent Value Destruction: Volatility is unsettling in the short-term but does not translate to greater long-term risk. Rather, risk is when value is permanently impaired, such as by management teams overpaying for assets, spending capital on low-return projects, or diluting shareholders via excessive share issuances and compensation.
Independent Advisor: As an independent advisor we provide financial consulting beyond investment management. Here are a few financial matters on which we’ve helped clients:
- Retirement Planning
- Estate Planning and Trusts
- Buying, Selling, and Valuing Businesses
- Mortgage Strategies
- Pledged Asset Lines of Credit
- Charitable Giving – Donor Advised Funds (DAFs)
- College Savings Planning
If you have a financial topic you’d like to discuss, it is likely we have experience with it or can refer to someone who does (e.g. Tax planning, Estates, Wills).
Custody and Reporting
Accounts are custodied at discount brokerage Charles Schwab & Company. Clients have online access to account balances, activity, and performance.
Privacy Policy
We value a comfortable, secure relationship with our clients. We are available for confidential discussions and evaluations of investment strategy, policy, and other matters.