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We spend 99% of our time focused on the 1% of stocks every other fund ignores
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Our Three Core Beliefs
High Quality Businesses
“Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now.”
– Warren Buffett –
Overlooked
“If you spend your energies looking for and analysing situations not closely followed by other informed investors, your chance of finding bargains greatly increases.”
– Joel Greenblatt –
Concentration
“It’s not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it – who look and sift the world for a mispriced bet – that they can occasionally find one.”
– Charlie Munger –
Why We Like Less Liquid Stocks
| Quartiles | Low Liquidity | Mid-Low | Mid-High | High Liquidity | |
|---|---|---|---|---|---|
| Micro-Cap | Geom. Mean Arithm. Mean Std. Dev. Avg. No. Stocks |
15.36% 17.92% 23.77% 323 |
16.21% 20.00% 29.41% 185 |
9.94% 15.40% 35.34% 132 |
1.32% 6.78% 34.20% 103 |
| Small-Cap | Geom. Mean Arithm. Mean Std. Dev. Avg. No. Stocks |
15.30% 17.07% 20.15% 196 |
14.09% 16.82% 24.63% 193 |
11.80% 15.38% 28.22% 175 |
5.48% 9.89% 31.21% 179 |
| Mid-Cap | Geom. Mean Arithm. Mean Std. Dev. Avg. No. Stocks |
13.61% 15.01% 17.91% 141 |
13.57% 15.34% 20.10% 171 |
12.24% 14.51% 22.41% 197 |
7.85% 11.66% 28.71% 233 |
| Large-Cap | Geom. Mean Arithm. Mean Std. Dev. Avg. No. Stocks |
11.53% 12.83% 16.68% 83 |
11.66% 12.86% 18.34 194 |
11.19% 12.81% 18.34% 238 |
8.37% 11.58% 25.75% 227 |
Data from page 25 of the Yale international Working Paper “Liquidity as an Investment Style” – by Roger Ibbotson et al. (2012)
5 Key Points from Roger Ibbotson’s Paper on Illiquid Stocks
- “Less liquid stocks outperform more liquid stocks.”
- “Less liquid stocks…have low…betas.”
- “Low liquid portfolios…(are) less risky than more liquid portfolios.”
- “Best return comes from combining high-value with low liquidity.”
- “The (low) liquidity style rewards the investor who has longer horizons and is willing to trade less frequently.”
Want to learn more? Just ask. We’ll give you a copy of the Yale International Center for Finance Working Paper #12-13: “Liquidity as an Investment Style” – by Roger Ibbotson et al. (2012)
Focused Compounding Capital Management
About Us
| Long-Term Stewardship
| Independent ownership
| Plan to stay under $300M in assets under management
| SEC Registered Investment Advisor
| Custodian: Interactive Brokers and Charles Schwab
Stylistic Skew
| Spin-Offs
| Stocks Emerging From Bankruptcy
| Microcaps
| Dark Stocks
| Stocks That Are Controlled By Their Founder
| Over-The-Counter Stocks
| Illiquid Stocks
| International Stocks
Recent Interviews
Performance
| *Returns are NET of all fees and expenses* | Q1 | Q2 | Q3 | Q4 | YEAR | Vanguard S&P 500 ETF (VOO) |
|---|---|---|---|---|---|---|
| 2018 (27 Weeks Ended) |
(9.3%) | (8.4%) | ||||
| 2019 | +14.0% | +10.4% | +25.9% | +18.5% |
Disclosure
*Returns are based on the Focused Compounding Capital Management Model Portfolio NET of a 2.5% annual management fee. Performance data of this model is produced directly from Interactive Brokers. It is important to note that each client may experience slightly different results from the model depending on the timing of deposits, withdrawals, the fee structure specific to each account, and other timing issues. The valuations of your investments at the time of purchase may be significantly different than the valuations at the time of purchase in the model because of these timing issues. We expect the net results of the model account to roughly equal the results of client accounts over time.