An Affinity for Investments

I like almost every single person I meet. This is a great fault with investing. We visit money managers. We talk with all sorts of investors. We meet the executives from various companies, all of whom seek to convince us that they are knowledgeable, and ethical, and able to make money for our clients. Then, a few years down the road, I find that my gut feelings are just as often wrong as they are right.

Recently, I've been traveling around the country, doing due diligence on various investment companies. This morning, I visited an investment company that has won a few awards. I met the CEO and a few portfolio managers and analysts. I learned a lot by being in their space, getting a feel for what really happens and how they react. The market was down, and there was a lot of red on their computer screens, and they handled it professionally. But I have been here before--not to this company--but one just like it. I can't tell you whether or not they will make the cut a few years out.

That is why our investment committee engages expert research teams, both Athena Invest and Litman/Gregory. Athena Invest, led by Dr. Tom Howard, has a ruthlessly logical evaluation process that does not involve meeting with the managers at all. If a company has a clearly defined strategy, makes high conviction decisions and invests consistently, the research shows they will outperform other managers.

On the other had, Litman/Gregory is well known for their extensive in-person due-diligence. The various companies I visited with this week comment on how hard it is to pass through the L/G tests. They know the reward on the other side is that you, our investors, and the clients of other firms, may be able to invest with their company.

I believe that if I had an unpleasant experience on my personal trips to visit these companies, then our clients would benefit by avoiding these companies. The researchers we've hired, with their unique, thorough, and rigorously logical and systematic due diligence are invaluable in helping us make investment timing and selection recommendations that serve our clients.

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