investment strategies

An ounce of prevention is worth a pound of cure

Without giving up too many trade secrets, here is some information that we use to identify and analyze investments.

We generally purchase individual securities, but may from time to time take advantage of Exchange-Traded-Funds (ie ETF’s).  Currently we do not use mutual funds as we believe a concentrated portfolio of securities we have analyzed provides more potential return for our client.  Whereas, we believe most publicly-traded mutual funds are too large and have too many internal costs to provide above market returns to their owners.  We may participate in Private Offerings if the thesis and analysis is compelling.  If we participate in a Private Offering we will secure your permission prior to deploying any capital.

We Focus on Fundamental Research:

  • We will not deploy capital unless we find a business model that meets our thorough analytical criteria.
  • We will not simply do whatever everyone else is doing with a “herd mentality”. 
  • We have our own ideas which may coincide with other investment firms.  We have confidence in our ideas our ideas due to our thorough analysis. 
  • We attempt to purchase companies at the lowest possible prices and may spend weeks or months purchasing the company with the hope prices may decline so that we may buy at a lower cost.

Risk as defined in our GROUND RULES:  we view “risk” as a shortcoming in our research.  While we cannot know the volatility in a security’s price,  we can determine what we know about a company through our research.  We learn as much as possible about our portfolio companies to ensure a “margin of safety'”.   Below are some of the analytical criteria to provide our investors an idea of how we analyze securities.

Capital Structure:

    1. Firm equity
    2. Firm debt
    3. Dividend/repurchase policies
Corporate Governance
    1. Board of Directors
    2. SWOT analysis
    3. Porter’s 5 forces
    4. Past success with mergers and acquisitions
    5. What is the cost of influencing in-place governance
General Analysis
    1. General ratio-analysis using Balance Sheet, Income Statement, and Cash Flow Statements.
    2. Earnings reports and transcripts of corporate disclosures.
    3. Top down analysis using ratios for industries and sector comparison.  For international companies, we review financials of operations overseas independent of domestic operations (ie sum-of-parts analysis).

We also utilize quantitative methods significantly including proprietary strategies that AUGMENT our selection process.  To keep cost low we have negotiated to receive these services as ‘soft dollars’ from our broker.

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San Diego, CA 92110

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