Minimizing Risk
Risk is commonly defined by investment professionals as the year-to-year volatility of returns. To mitigate volatility, most investors seek to hold a diversified portfolio – hoping to offset declines in some holdings with gains elsewhere.
We agree that low volatility is an important objective. However, we manage portfolios with a more fundamental definition of risk: the probability of losing one’s capital.
To minimize the probability of loss, an investor must avoid buying securities when they are over-priced and selling when they are under-valued. We employ the following disciplines:
We agree that low volatility is an important objective. However, we manage portfolios with a more fundamental definition of risk: the probability of losing one’s capital.
To minimize the probability of loss, an investor must avoid buying securities when they are over-priced and selling when they are under-valued. We employ the following disciplines:
Investing in just 15-20 companies that we study carefully and follow closely.
Investing in lower risk businesses – companies which enjoy constant and recurring
demand for their products and services.
Creating a margin of safety by purchasing common stocks at prices well below our
estimate of the intrinsic value of the company.
Holding a portfolio of companies which, as a group, produce higher profits and
dividends year-after-year.
Investing in lower risk businesses – companies which enjoy constant and recurring
demand for their products and services.
Creating a margin of safety by purchasing common stocks at prices well below our
estimate of the intrinsic value of the company.
Holding a portfolio of companies which, as a group, produce higher profits and
dividends year-after-year.
By abiding these disciplines we have consistently achieved less volatile results for our clients. More important, we have significantly out-performed the major equity market benchmarks during periods of broad and sharp market declines.
