Vol I, No. 9       

October 2013  



A monthly review for investors and their advisors about how the quirks of human behavior

drive investing...and what you can do about it



The Misbehaving Investor

My childhood foray into coin collecting introduced me to some basic investment concepts.

"Growth" and "Value" are two concepts that didn't come up in my coin collecting days but that are often used today to describe investment styles.  In this month's issue, I'll discuss how they fit into the way we see investing.

Please contact me with your feedback and questions.

All the best,


John Feb 5    

John Heldman, CFA


About Us

Triad Investment Management manages equity and balanced portfolios, analyzing companies with a business-buyer's perspective and investing with a focus on investor behavior.  Founded in 2008, the firm is 100% owned by its employees.  New relationships start at $1 million.  


Triad has $121 million of assets under management as of 9/30/13.  The Concentrated All-Cap Equity composite return, annualized and net of fees since inception, is 11.8% vs. 6.0% for the S&P 500 Index  (4/30/08 to 9/30/13). 

For more information:
(949) 679-3991

Heads or Tails


When I was a kid I collected coins for a few years. Hey, watch who you're calling a nerd! My parents bought me a cheap coin-holder set one year for Christmas. While my childhood coin collection and modestly valued, I knew there were valuable coins out there worth big bucks. Trouble was, I couldn't afford them. Eventually, my little brother made off with a chunk of my pennies, nickels, dimes and quarters, and I abandoned collecting for baseball. I had more success in this area. Then my little brother dismantled my trophies to use the nuts and bolts to fix his bikes. True story. But I forgive him.


We get asked by prospective clients: "What's your investing style: Growth or Value?" See, I made them seem more important by capitalizing them. But, they're really just labels.


Growth investing commonly refers to buying companies with high growth rates, often without careful consideration of the price or valuation of the stock. The idea is the growth prospects are so enticing it doesn't matter what price is paid. Think exciting, high-growth areas like Biotechnology, Social Media, Technology and the like. Companies such as Facebook, LinkedIn, Tesla, very soon Twitter, and Potbelly. What, never heard of Potbelly? A chain of sandwich shops which just went public at $14 and closed the first day at $32 per share. Clearly, someone is expecting this pig to grow and grow. Good luck with that.


Value investing is often thought of as the opposite of growth investing. Dull, slow or no growth companies in sluggish industries selling at below-average or "bargain" valuations. The idea here is it's so cheap that you can't possibly lose, and you might actually make money. Think, coal, steel, newspapers, tobacco. Yesterday's industries. Buy a dull business that's undervalued and sell it when the shares reach fair value. This form of investing is often referred to as "cigar-butt" investing, akin to finding an old cigar on the street and extracting the last few puffs. Not very satisfying or long-lasting, but the price is right. And yes, kids, it's gross.


We have a different view. We see value and growth not as opposite approaches, but rather opposite sides of the same coin. We expect business growth, for that's the only true source of long-term investment gains. But while we expect growth, we don't want to pay a ridiculously high price for that growth. Otherwise, business value growth can be completely offset by overpaying. Remember the late 1990s dotcom boom? That became the dotcom bust? Our approach is to ask for both. We won't pay a very high price for growth that may not materialize. But we also won't buy a declining business just because the "price" seems right. Nope, we'll hold out for both growth and value.  




Unlike my childhood collection of run-of-the-mill coins, achieving both Growth and Value in the same investment can be difficult to find. While I couldn't afford rare coins in my youth, we can afford to wait patiently until the market serves up that rare combination. And when it does, we pounce like a collector going after the rare 1849 "Double Eagle" $20 gold piece, reportedly worth $20 million. 

Past performance is not a guarantee of future results.
Results are presented net of fees and include the reinvestment of all income.


2013 Triad Investment Management, LLC