We are Value Investors, which we define as investing in undervalued securities (stocks, bonds) which present a considerable "margin of safety." In order to do this successfully over time, one must commit themselves to conducting thorough research and analysis of each investment. This takes time and an immense amount of work, and in spite of what people may think, it is something we truly enjoy (it’s true).
Maredin Wealth Advisor’s investment philosophy is principally derived from the work of the late Benjamin Graham, professor at Columbia Business School, and Warren Buffett, CEO of Berkshire Hathaway. These two gentlemen focused on a number of important factors but none more important than determining the “Intrinsic Value” (our estimate of an investments value) of a company. Though this value can be derived in many ways, we focus on the following five: Acquisition Value, Liquidation or Collateral Value of its Assets, Discounted Future Cash Flows, Management Effectiveness, and General Business Environment.
Establishing “Intrinsic Value”, and the “Margin of Safety Principle" are the two most fundamental elements of Maredin's research and investment philosophy. Every company we invest in is analyzed, where we estimate its "Intrinsic Value." The “Intrinsic Value” is then compared to its current market value to determine the attractiveness of the investment. In order for Maredin to invest, an investment must be made at a significant discount to the "Intrinsic Value" [normally 40-60% below it], which simply means that we are buying it with what we believe to be a built in "margin of safety" (as Benjamin Graham called it).
The aspect where we deviate from the traditional interpretation of Value Investing is that we spend considerable time understanding the macro environment and engaging in hedging when we determine it is necessary. We determine when to hedge depending on our reading on a number of key indicators.
It is our belief that is it virtually impossible to time the market. This is not something we try and do. What we do try to accomplish is take advantage when our key indicators reach a certain level, and then put our hedges in place. We generally leave these hedges in place, until we believe they are no longer ideal. This could be anyway from few hours to a few weeks.
We at Maredin are committed to our clients and their investments. That is why we research and select only those common stocks and debt instruments selling at a discount to their estimated intrinsic value, within our “Margin of Safety.” We work to ensure that our clients are always getting more than they pay for. Like Benjamin Graham, Warren Buffett “…never forgets that he is handling other people’s money and this reinforces his normal strong aversion to loss…money is real to him and stocks are real, and, from this flows an attraction to the ‘Margin of Safety Principle”, from Supermoney, 1972. (The Intelligent Investor, 1973, p.542). We couldn’t agree more!!
In addition to the key tenets mentioned above, there are several other key points of our investment philosophy. They are:
Understand Risk - The assessment of risk is of paramount importance to us with each investment we make, which also carries over to overall portfolio risk, or the combined risks of each investment and its aggregate risk to the entire portfolio of investments.
"Eat your own Cooking" – Our founder, Marcelo Zinn, has invested almost all of his family’s life savings in the portfolios he manages. Substantially all of his extended family’s assets are invested as well.
Be Independent - Form your own opinion based on detailed research and analysis. Listen to anyone and everyone, but make your own decisions.
Circle of Competence – The all-important, but often ignored, focus on companies we understand and avoid those that we do not understand well.
Focus on Good Businesses – This is pretty self-evident. Focus on good companies managed by good CEO’s. If the right price is paid, this is a great way to do well, long term.
Focus on the Long-Term – Since one cannot predict the future, we focus on what we can control; identifying opportunities where price and value have a significant disparity. We cannot know if the market will acknowledge that a given company we like is undervalued in a day, week, month or even a year. But, when we have done a good job in our analysis, and paid the right price, eventually the market will recognize the true value of the investment, and we will reap the rewards.
Concentrate the Portfolio in the Best Ideas – We at Maredin work very hard to analyze each company in our portfolio and hence, when we find opportunities that are very compelling, we concentrate our funds in those best ideas.
Avoid Forecasts - We do not try and time the market or engage in economic forecasting. This is due to the fact that forecasts are only right some of the time. Since we focus on individual companies and on the long-term, we avoid putting much emphasis on short-term results. This isn’t to say we are blind to the markets, because we pay close attention to them and the economy, but because our focus in long-term, we're not as apt to react to movements on a short-term basis.
Opportunistic - We try to be opportunistic and look for corrections and large moves in stock prices. Those may allow us to buy companies that are cheap for reasons that are temporary, or sell stocks at elevated prices.
Look Under Every Rock – We believe that many of the best opportunities are in companies that have been ignored for one reason or another. Some of the reasons have to do with a corporate event (spin-off, merger, ), size (small capitalization stocks), price (trading below $5), or short-term news-worthy issues that will not affect the business value long-term.