Invest in companies with solid growth potential either start-up or mature. Find opportunities through a multi-layered, 3 person due diligence team. Diversify our portfolio among sectors of the economy, stages of companies growth, and risk reward ratios.
Our core belief in investment management and research is to adapt to financial markets by leveraging technology, research, and risk management. This can be maintained by stayed true to a few very important investing rules.
Trumping all portfolio management rules is liquidity. Cash levels maintained equal 10-40% of portfolio. This allows us to take advantage of market dislocations that come about unexpectedly, while also allowing us to exit positions smoothly. Private Investments must be laddered properly. We work to understand the timing of liquidity events and the importance of dividends, allowing cash flows from these investments to be consistent and more predictable.
2. Technical Analysis:
Technical Analysis shows the daily phycology of investors and institutions. We use this analysis to predict upside and downside potential alike, and give glances to nearly all barometers of a markets. This gives us granular analysis throughout global markets. Adapting to new markets requires strong technical research. As high frequency and program trading take over, the relevancy of chart analysis is more important than fundamental analysis. The fundamentals of a company reflect in a chart regardless. This can hold true in the private markets if numbers are extracted properly. Investing in private markets must be done by using not only fundamental analysis, but phycology as well. That said, daily companies in the private market are using big data to extract useful technical analysis in business trends, revenue trends, etc.
3. Time risk:
The risk of time is the single most important variable in trading securities. Even in private markets, time risk is absolutely crucial. How long can a start-up maintain there burn before they run out of money? Public markets suffer from time as well. Duration is talked about in bonds but not in the equity markets. Imagine all of the things that could happen to each security or the market as a whole on any given day, month or year. There is too many variables that can affect the markets and particular companies, to not pay attention to time value and time risk. This is one reason why we favor private equity, as their is little perceived volatility and intervention by systematic trading and unfair operational standards.
4. Reduction of volatility drag:
Avoid losing money on an intra-day, daily, monthly, or yearly basis. We would rather take smaller profits to compound our portfolio than hit for home runs. In private markets, spreading your risk from stronger cash flow companies to early stage companies help reduce volatility.
Dislocations among markets and companies are always out there and very mis-priced because of brand powering or unforeseen earnings potential. These opportunities need to be exploited.
A asset manager must understand their ability to manage the size of each position and understand how the size effects your emotions and abilities to make choices going forward. This same thought process goes for the type of security, the risk of a security, and the leverage used. Everything aspect of investing changes the investors psychology.
7. Market Heartbeat:
The market heartbeat can be felt if you are an avid ‘tape watcher’. It is important to feel the movement of stocks and the intraday buy and sell programs that can help predict future prices. “Tape Watching” also allows for first mover advantages when mispricing and mistakes occur in the markets. G&B watches the market like a hawk. On a micro level, visiting companies and getting a hands on feeling of the management and energy amongst employees is crucial to understanding your investment. It is like feeling a pulse. We visit all our private investments often.
Management and Advisory Power:
The power of having proven successful entrepreneurs and powerful investors in deals in priceless. Investing in companies that have proven managers is crucial to success. This may not always hold true but understanding deeply who will execute an investment is vital. Powerful investors can make phone calls that help in various ways for a company, offer advice, and find more powerful investors to come along for a success story.