Vol III, No. 1

February 2015   

 

 

A monthly commentary about the role of behavior (and misbehavior) in investing

 

 

The Misbehaving Investor
     

When you ask an investor what their stock is worth and they look at their iPhone or Google the stock ticker, watch out.  

 

In our view, stock prices sometimes but do not always reflect underlying business values as this month's issue discusses.  

  

John Feb 5  

John Heldman, CFA

President
jheldman@triadim.com


Dave Hutchison, CFA
Managing Director
dhutchison@triadim.com
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 100% employee-owned SEC registered investment adviser.  Learn more at www.triadim.com

 

Triad has $138 million of assets under management as of December 31, 2014.  The Concentrated All-Cap Equity composite return, annualized and net of fees since inception, is 10.9% vs. 8.5% (April 30, 2008 to December 31, 2014).

 

Please review our Concentrated All-Cap Equity annual disclosure presentation and the important disclosures at the bottom of this issue. Past performance does not guarantee future results.



 
 
Triad Small 1-24

For Rent

 

Many professional investors state a "long-term investment orientation" when it comes to buying and selling.  It's tough to trade in a hyper-active manner and generate strong long-term results.  So why do we see so much trading when a company announces news, especially when the news isn't so good?

 

For example, a retailer that we own recently disclosed that financial results for its upcoming quarterly report would come in "below Wall Street consensus".  Which is to say, the company previously gave Wall Street its best guess about the future, and now must lower it, disappointing the Wall Street cheerleaders.  Guess what happened to the stock price?

 

It got clobbered when it announced that earnings would be below the consensus guess.  The stock dropped almost 25% in one day.  Roughly 40% of the shares traded.  Let me repeat that:  40% of the "owners" (I use the term loosely) of this business departed, walked out, left the building, in one day.  Did the value of the business decline so radically that 4 of every 10 shares needed to be sold?  Was the long-term viability of the business in serious jeopardy?  Was there a change in strategy?  The answers, in our view, are no, no and no.

 

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sears.com (really)

 

Negative events often remind some professionals how little they truly understand about a particular investment.  But it's also a reminder that short-term events will continue to appear on the road to long-term investment results.  Being prepared analytically and emotionally is necessary to avoid group think and joining the crowd.  This means doing your own homework and investing only at a price that incorporates the possibility for negative events to occur.  Because they will, and you can be sure the renters will be moving out on you, leaving a temporary vacancy in your investment portfolio.

 
-John Heldman, CFA
Past performance does not guarantee future results. Results are presented net of fees and include the reinvestment of all income.  
 

Triad Investment Management, LLC claims compliance with the Global Investment Performance Standards (GIPS®). Triad has been independently verified by Ashland Partners & Company, LLP for the period from the strategy's inception, April 30, 2008, through September 30, 2014. Triad is an SEC-registered investment advisor. The composite includes all fully discretionary separately managed accounts that follow the firm's Concentrated All-Cap Equity investment strategy, including those accounts no longer with the firm. Triad's strategy is to invest in a concentrated portfolio (usually holding between 20 to 30 securities) of common stocks, unrestricted as to market capitalization, of both domestic and international companies. The U.S. Dollar is the currency used to express performance. Past performance is not a guarantee of future results, and there is a risk of loss in investing in equities. Results are presented net of fees and include the reinvestment of all income. Investments made by Triad for its clients differ significantly in comparison to the referenced indexes in terms of security holdings, industry weightings, and asset allocations. Accordingly, investment results and volatility will differ from those of the benchmarks. As of June 30, 2013, the Triad Equity Composite was renamed the Concentrated All-Cap Equity Composite.  For more information or for a copy of the firm's fully compliant presentation and the firm's list of composite descriptions, please contact us at (949) 679-3991.

 

 

%
4Q 14
YTD
1 Year
3 Year
5 Year
Inception
Triad Concentrated All-Cap Equity
2.8
1.8
1.8
23.2
14.6
10.9
S&P 500 Index
4.9
13.7
13.7
20.4
15.5
8.5

As of December 31, 2014.  Results presented net of management fees.

 

     

© 2015 Triad Investment Management, LLC