Tralucent Asset Management will use a similar low turnover, “growth at a reasonable price” approach that focuses on high quality companies available at value prices for its clients that has been successfully used by its founder for the last two decades. This strategy and its underpinnings are described in greater detail below. Prospective investors and readers are urged to read it as we firmly believe they will find it highly educational.
There are more opportunities globally than in just one country: We use global equities to provide for growth in portfolios. The focus is on global equities as the chances of finding bargains are greater when looking worldwide, as opposed to looking at just Canada which represents less than 10% of the total market. Mankind in totality is destined for higher highs and portfolios that contain worldwide economies are likely to move higher over time. Global economies are fierce and the winners are those companies that are the most competitive, through effective use of resources, and because they are innovative and vigilant. We have provided a brief description of a few relevant books such as the ‘Autobiography of Sam Walton’ and ‘Only the Paranoid Survive’ by Andy Grove of Intel in our section titled Articles and Books Worth Reading
As at Sept. 30, 2011 Apple had $25.9 billion in cash on its balance sheet; Google had $42.5 billion; and Microsoft had $57.46 billion. Now add Samsung, with its billions in cash and vast manufacturing prowess. Compared to all that, RIM sat with a paltry $2.1 billion in cash as at February 2011.
What is even more important than just the cash figures, these players also out-innovated RIM. By many respects, RIM had a head start, yet has stagnated in the past few years with its Blackberries. Many investors not looking into the global nature of business loaded up on RIM only to be disappointed by the massive selloff we have seen over the past year+. This is another reason to think globally as much as possible.
We are therefore looking for globally competitive companies that have the resources, the will and the culture to grow in this competitive global village.
The trick to making the most of your money in everyday situations is to buy bargains. This is also very true in the world of investments. To state the obvious, investment success is not luck but goes to those managers who systematically exploit this. We could not find a better way of describing this but to refer you to this article titled ‘Superinvestors of Graham and Doddsville’, written by Warren Buffett.
Insanity on Wall Street is exceeded only by insanity on Wall Street and a special thanks to the insane public markets where we can routinely find bargains. If you were in the market for a house and you find one selling for $450,000 that is really worth $500,000 you would be delighted. Stock markets are so crazy that you can routinely find the equivalent of such houses selling for half that or even lower.
Why buy just value when you can buy growth at value prices? At Tralucent, we have gone one step beyond simple value investing – we focus on highly competitive companies that the public sells down to bargain prices. Some may refer to it as GARP, or ‘growth at a reasonable price’. This is also an example of our contrarian investment approach to equities which is described in books written by David Dreman and listed under Articles and Books Worth Reading.
Our Private Equity approach to Public Equities: We buy shares in companies with a view that we want to be associated with that competitive and growing organization for a long time. Thus, we do not trade securities very often. It is indeed extremely rare for us to sell anything in the same year we have purchased it, and holding periods of five, ten and even fifteen years are quite common. We may be described as ultra low turnover managers. In many respects we are replicating a private equity approach in the public markets.
Models behaving badly: In order to do the above we do not have any fancy models because we are convinced models are destined to behave badly. The real world is far too complex to easily model through mathematical equations and so we focus instead on reading, understanding the world, travelling to see, meet and experience companies first-hand, and preparing mentally and portfolio-wise to withstand a lot of the ups and downs that the emotional world has to throw at us.
Diversification Pays: We use extensive diversification as an essential tool in handling ups and downs. We offer the case of the Dow Jones Industrial Average, a portfolio of thirty blue chip stocks and point out that this portfolio of just thirty stocks has NEVER gone to zero. One will never be able to eliminate market movements but one can quite easily reduce the chances of being blown away through effective diversification.
Our other Do’s and Don’ts: We have included a whole list of DOs and DON’Ts here to provide an illustration of how we operate.