Investment Management

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Investment Philosophy & Process

"Common stocks have one important investment characteristic and one important speculative characteristic.  Their investment value and average market price tend to increase irregularly but persistently over the decades, as their net worth builds up through the reinvestment of undistributed earnings.  However, most of the time common stocks are subject to irrational and excessive price fluctuations in both directions, as the consequence of the ingrained tendency of most people to speculate or gamble." Benjamin Graham

     We utilize a research driven, value approach to security selection, focusing our analysis on "what is" rather than attempting to forecast "what will be". Often referred to as "bottom-up" or Graham and Dodd analysis, we seek to make long term investments in companies having the ability to create shareholder value when we believe the shares are selling at a significant discount to their intrinsic value. Intrinsic value is determined by fundamental analysis of company financial statements including asset valuation, earnings power valuation, and private market transaction values. 

     Portfolio positions are held until the market share price reaches our calculated intrinsic value.  This often results in our holding our investments for several years at a time.  Positions are adequately diversified to minimize the risk of errors in analysis and/or events that could adversely affect intrinsic values. In general, no one issue, at cost, will account for more than 3% to 5% of portfolio assets. We invest over the universe of market capitalization, which reduces our exposure to index related volatility. Our long-term focus minimizes portfolio turnover, allowing us to take greatest advantage of pre-tax compounding of return.

     Most equity investments in portfolios we manage have one or more of the following characteristics: low price to book value or replacement value of assets, low price to earnings and/or cash flow, conservative use of leverage, insider share purchases, company share repurchases, and low price to sales ratio.  Academic research has shown that each of these characteristics have a statistical correlation and above average investment rates of return over long periods of time.

  For further information please mail at info@lichstrahl.com