by Tom Bradley

If you’ve been a client for a while, you’re used to our name, but when we started in 2007, it wasn’t something that rolled off the tongue (even mine). We picked it because we believe that to achieve good long-term returns, not only must our funds do well and our fees stay low, but our clients must do the right things.

Staying on plan is difficult at market cycle extremes when investors are scared (or euphoric), emotions are high, and mistakes come with big consequences. We’re at one of those times now. Markets are down significantly, and the headlines are anything but rosy.

I think we’ve lived up to our name when we’ve been tested previously, but it was never obvious we were doing the right things until months later. To provide a steady hand, there are a few disciplines we adhere to.

First, we use the word ‘when’, not ‘if’. We don’t hedge on this. By acknowledging that our funds will go down, we’re prepared to do our best work when it’s most needed.

We focus on buying businesses, not trading stocks. One of our core beliefs is that the short-term direction of the market (or a stock) can’t be predicted … ever. We understand economic trends and fads as well as anyone, but we don’t get caught up in them.

We focus on strong companies that make something we need. By owning businesses that we know will be around after a recession or crisis, we’re able to buy low when others hesitate. Sketchier companies provide better returns at certain times, but they don’t always survive the tough times.

Our starting point for assessing reward and risk is TODAY. We’re sensitive to our clients’ disappointment when recent returns are poor, but as investors we must have short memories. Future returns start now, not six months or a year ago. Being dogmatic about this means we often get excited about opportunities when our clients are least happy.

We never lose sight of the price we’re paying. Valuation is not the only determinant of how a security will perform, but it’s the most important one. And it’s a good risk management tool – i.e. it helps limit the damage when we do something stupid.

And finally, we do the opposite of what our hairdresser tells us to do. No knock on hairdressers, but the mood of investors is also a good risk check. If everyone is excited and optimistic, we know to be careful. When people swear they’ll never own another stock, we look for opportunities to do some buying.

Nobody knows when stocks will find a bottom and start to recover. It could be another 3 to 12 months, or it may have already started. What we know for sure is that most of the money will be made well before the current problems are resolved. So, our fund managers will continue to do the heavy lifting, buying quality companies on your behalf and selling when warranted.

Our biggest ask is that you stick to your plan. In doing so, if you need a steady hand, sounding board, or outlet for your frustration, lean on us.

I encourage you to read the rest of our Q3 Report, where we provide more details on our specific strategies and what we've been doing in each of our funds.

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