Vol I, No. 12

January 2014   

 

 

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

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

 

 

The Misbehaving Investor
     

As the new year began, college football ended its season with the final BCS championship in nearby Pasadena just over a week ago. 

Florida State unexpectedly faced Auburn this year instead of Alabama, winner of 3 of the past 5 titles.

Though the year did not end with a crystal football for  Alabama, their consistent success in the past few years came in large part because of their disciplined process - something we think is critical in investing, too.

All the best,

John Feb 5  

John Heldman, CFA

President


Dave Hutchison, CFA
Managing Director

About Us

Triad Investment Management manages equity and balanced portfolios with a focus on research, behavior and ethics.  We invest in companies with a business-buyer's perspective.  Founded in 2008, Triad is a SEC registered investment advisor that is 100% employee owned.  New relationships start at $1 million.  

 

Triad has $134 million of assets under management as of December 31, 2013.  The Concentrated All-Cap Equity composite return, annualized and net of fees since inception, is 12.6% vs. 7.6% for the S&P 500 Index  (April 30, 2008 to December 31, 2013). 

 
For more information:
(949) 679-3991



 



Triad Small 1-24

Nobody's Perfect 

  

They got a name for the winners in the world

I want a name when I lose

They call Alabama the Crimson Tide

Call me Deacon Blues

 

"Deacon Blues" by Steely Dan 

 

 

I'm not sure what Steely Dan and Alabama football have in common, but I do love the song. Their lyrics were always a bit abstruse, kinda like the word abstruse.

 

In any case, bowling season has ended. College football bowl games, of course. What's notable about this year's national championship game was who wasn't there. Alabama. Winner of national titles in 2009, 2011 and 2012, Alabama suffered a couple of late-season losses, including a stunning loss to Auburn. On the last play of the game. On a missed Alabama field goal that Auburn returned 109 yards for a touchdown. These things just don't happen, especially to Alabama teams.

 

But, don't feel too sorry for the Crimson Tide. Coach Nick Saban's record since joining in 2007 is 79 wins, 15 losses and 3 national championships. Plus fourteen first-round NFL draft picks. Pretty good. No, really good.

 

What's his secret sauce? Something called "The Process". Saban tells players to drop thoughts of winning or losing, and instead focus on the activities that create success. Take it one play at a time. Make the best block, the best run, catch the best pass you can. Sounds simple, but the record indicates it works.

 

Maybe Saban is just a great game-day motivator?  No, victory is built long before game time.  

 

It starts with recruiting. Yes, school reputation and modern facilities help. But lots of schools have both. Alabama's process for recruitment is highly detailed, with each player selected based on 8 to10 position-specific criteria.

 

Saban's system reduces player selection risks and improves the chance of success. Said a former assistant coach about the recruitment process: "It was scientific. You're going to make mistakes in recruiting. The key is not to have bunches of them. His process cut down on the mistakes".

 

He minimizes distractions and stays focused on the factors that create results: evaluating, recruiting, and teaching. He doesn't get overly involved in other job duties such as marketing, community and public relations.

 

If you've made it this far, you must surely be wondering what this has to do with investing. Close the door...I'm going to tell you. Investing success comes mostly from how well you execute your process. Ignore the scoreboard, which represents daily or weekly stock market gyrations.

 

Instead, focus on the playing field, which translates to understanding what makes one business better than other. This means analyzing sales, earnings, market share, new products, customers and competitors. In the end, investment wins and losses are determined by how the business performs.

 

Like Alabama, we'll make some mistakes, but our process should keep them to a relative few. Like Coach Saban, we try and ignore distractions and stay focused on selecting the right companies and paying the right price. When we do that, the stock market might provide us with our own version of a national championship ring to show off.

 

-John Heldman, CFA  

  

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

     

2014 Triad Investment Management, LLC