What is your investment philosophy?
We use a hybrid approach where we invest in both indexes via ETFs and in individual stocks. We spend a significant amount of time researching and following the companies in which we invest. We prefer companies with little to no debt and solid and consistent cash flows, and we prefer management teams who allocate capital wisely and boards who have shareholder friendly policies.
What do you mean by shareholder friendly?
In short, shareholder friendly boards and management teams respect the capital that shareholders entrust them with and seek to grow and compound that capital as efficiently as possible. Like any business relationship, short term interests and long term interests between shareholders, the board and management are not always aligned. We are constantly on the lookout for such conflicts and seek to avoid them as best we can.
How do you select stocks? What’s your idea generation process?
We build sophiticated, quantitative valuation models and screens and seek to purchase stocks when they are on sale, or trading below their intrinsic valuation levels.
What is intrinsic value?
Intrinsic value is what we believe a company to truly be worth, based upon its anticipated cash flows or dividends, which is independent of the price at which its stock is trading.
Why does the intrinsic value value differ from the market price? I thought markets were efficient.
This is a very philosophical question and we will be happy to provide you with a long and philosophical answer if you want to hear it, but the short answer is that we do not subscribe to or believe in the efficient market hypothesis. We believe that security mispricings can and do occur. We believe that markets are for the most part rational but can become irrational at times, and that such times present the greatest opportunities. To quote the legendary investor Benjamin Graham: “In the short run, markets are a like a voting machine and in the long run, markets are like a weighing machine”.
What does a typical portfolio that you manage look like? What is its allocation?
We invest in companies up and down the market cap scale, all across the style spectrum, and all across the capital structure, but in general we tend to overweight value stocks over growth stocks, and small company stocks over large company stocks.
Why do you overweight value stocks and small cap stocks?
We are firm believers in the premiums provided by the value and size factors. In English, this means that investors tend to get paid for the risk that they take when they invest in the value and size factors. As result, stocks with these characteristics have outperformed the broader market over time. Academic research which supports this view can be found here.
I could buy index funds myself, why should I hire you?
A high quality financial advisor can provide value in a whole variety of ways, including tax efficiency, behavioral coaching, and financial planning. This paper, published by the Vanguard group (the pioneer of the index fund) provides some information on how high quality advisors can and do add value.
Do you sell insurance?
We do not sell insurance. We are licensed insurance agents so that we can provide advice on insurance to our clients as part of our financial planning process. But we do not sell insurance or receive commissions or trails from the placing of any insurance products. For more information, please see the NAPFA Fee-only pledge, to which we are a signatory
What is NAPFA?
NAPFA is the National Association of Personal Financial Advisors which has roughly 3,800 members nationwide. Members take a fiduciary oath and adhere to a rigorous code of ethics. We have been NAPFA members since 2019.
What are your fees?
We try to keep our fees as simple as possible: we charge a fee of 1% per annum of any assets of yours that we manage. If you have at least $100,000 under management with us then any financial planning services that we provide to you are included in these fees. We also offer financial planning as a standalone service, and fees for this service vary depending on what it is that you need help with. Keep in mind that, should we manage your assets, you will also pay brokerage fees to the custodian in addition to our fees.
Do you have a minimum amount of assets that you manage?
Our minimum is $100,000, but we will waive this under some circumstances and at our discretion.
I have more questions, how can I get in touch with you?
The best way to contact us is to email me at firstname.lastname@example.org. Or if you would like to speak with us by phone, we prefer that you set up an appointment here rather than call us.
Why do you prefer that I set up an appointment online rather than call?
We are a lean, efficient organization. We do not employ secretaries or call center agents. Our investment professionals are very busy and handle all client interactions directly. Accordingly, we prefer setting up appointments and sticking with the schedule rather than playing phone tag.