Independence Matters

With more than 25 years of running our own investment firm, we revel in our independence. We conduct our own research, manage to our own benchmarks, and take comfort in not conforming to look like everyone else.

Our approach is disciplined. We hold positions supported by our fundamental analysis, emphasizing those positions and sectors based on our conviction, and stepping aside where we see little upside or undue risk. And, where authorized by our clients, we may short market indices if our economic alerts and momentum indicators are warning of a recession or bear market.

Independence is Uncommon

There are inherent conflicts at many firms who both publish research and conduct investment banking. Research analysts covering companies often work alongside colleagues whose jobs are to win banking business from those same companies. In 2003, ten of the largest firms on Wall Street settled enforcement actions with U.S. regulators over investment banking pressure shaping the conclusions research was supposed to reach independently. The settlement forced industry changes such as walls between divisions, disclosure requirements, and funding for outside research.

Despite industry changes, issues still exist today. Furthermore, advisors may be steered toward in-house research and model portfolios built by the same institution that profits from underwriting, lending, and trading with investment banking clients.

Also, sell-side research is persistently optimistic. Buy ratings vastly outnumber sell ratings. Earnings estimates tend to run ahead of what companies deliver. Analysts who downgrade major clients’ stocks create friction for these firms. While not necessarily done in bad faith, the effect is the same. Research that investors lean on for difficult decisions skews toward agreement, not scrutiny.

And price targets from brokerage analysts are virtually useless. They tend to simply hug recent stock prices rather than being based on appraised values, likely due to the fact analysts are afraid to make incorrect calls in print.

Our Work is Our Work

We don’t rely on outside research or commentary or utilize someone else’s models. Every step, from gathering fundamental data, to building quantitative models, to estimating fair market values, to security selection and portfolio construction, is architected and completed by our team, and overlayed with our proprietary models.

More specifically, this all runs on our internal research platform, Wellspring^™, which draws institutional-grade data from a variety of sources and brings our full process under our roof. We screen a broad universe of stocks across factors such as value, quality, shareholder yield, and financial strength, continually test how those strategies behave across market cycles, and apply our own valuation models to estimate fair market values. And each security is monitored using our proprietary TRAC^™ system which acts as a timing tool for securities that pass our research process.

Because we don’t license someone else’s methodology, there’s no waiting for a software vendor’s release cycle. When we find a better way to test a model assumption or source data points, we can build it into the process immediately.

Thinking Independently

The ability to think independently when markets become frenetic is another key benefit.

Markets move based on sentiment in the short term and underlying fundamentals in the long term. Sentiment can be contagious. Animal spirits often move through the whole chain at once: the companies raising capital, the banks underwriting it, the analysts rating it, the media amplifying it, the investors chasing it. Each link takes confidence from the others, and the more emboldened the consensus becomes, the harder it is for most to behave differently. The dot-com era was indicative. So was the run-up before the financial crisis. We saw this behaviour again in the post-pandemic surge and in this year’s run in precious metals (which reached record highs before correcting sharply). And we see it now in the enthusiasm around AI-related stocks.

Independence helps one avoid that current. We are anchored to a set of convictions that do not move with the mood of the market—rigorous fundamental analysis and disciplined risk management. This allows us to hold steadfast when prices are climbing on little more than momentum and the pressure to join in is strongest. We are not contrarian for its own sake, and we have no interest in missing out but we only act based on our work, and we have the temperament to withstand looking out of step as long as our discipline supports it.

Our clients are not squeezed into someone else’s models. A client’s objectives, risk profile, time horizon, income needs, tax situation, and overall goals can better be shaped by building and adjusting independently constructed portfolios.

We invest for the long term, expecting difficult market environments periodically. Our attention is focused on clients’ needs today and over the years ahead, managing clients’ wealth from one generation to the next.