Maintaining Portfolios

We con­tin­u­ously update the sce­nario fore­cast model and each stock model to reflect new developments.

Buy Dis­ci­pline

  • The max­i­mum posi­tion we will buy in any stock is 5% of a total portfolio.
  • Only the largest com­pa­nies in the world qual­ify to have a max­i­mum posi­tion. Smaller com­pa­nies would sup­port pro­gres­sively smaller posi­tion sizes.
  • A company’s trad­ing liq­uid­ity, “qual­ity,” sus­tain­abil­ity, diver­sity and the degree of con­fi­dence we have in our esti­mates and fore­casts are also fac­tors in deter­min­ing posi­tion size.

Sell Dis­ci­pline

  • Sell when the min­i­mum inter­me­di­ate return has become less than or equal to a com­pa­ra­ble matu­rity US Agency bond.
  • Sell when the 12-​month sce­nario analy­sis leads to a tar­get port­fo­lio with a change in sec­tor, regional or equity exposure.
  • Sell if devel­op­ments lead to a lower pro­jected return in our analy­sis of the company.

All parts of our invest­ment process inte­grate both dif­fer­ent deci­sion mak­ing dis­ci­plines and also all of the dif­fer­ently focused invest­ment staff.

All of our pro­fes­sional invest­ment staff par­tic­i­pate and vote in all of our invest­ment meet­ings whether about the macro-​economic assump­tions in a sce­nario fore­cast, the com­po­si­tion of a tar­get port­fo­lio or the price at which to buy or sell a par­tic­u­lar stock.

Our invest­ment strat­egy is based on the phi­los­o­phy that the best way to “beat the mar­ket” is to be safely pro­tected when it goes down, not dan­ger­ously exposed when it goes up.

This means always think­ing about the unlikely and unpleas­ant things that might hap­pen rather than the most likely or most hoped for pleas­ant out­come. A diver­si­fied port­fo­lio that takes account of all pos­si­bil­i­ties is like a house­hold that is always pay­ing a fire insur­ance pre­mium (this is only a metaphor; we do not offer true insur­ance). Most years the pre­mium reduces income; but when mis­for­tune strikes the insur­ance pro­vides pro­tec­tion. Mis­for­tune strikes the stock mar­ket far more often than fire strikes houses.