Whether investing in stocks or bonds, our investment approach starts with quality. Every stock we purchase for our clients must first pass the "Buffet 10 Year Quality Test."If you don’t feel comfortable owning something for 10 years, then don’t own it for 10 minutes." A positive answer to this question leads us to start our decision-making process with an elite group of financially strong companies.
CASH FLOW MATTERS
In most of the investing world, dividends and interest payments don't get much attention. At WSIM, dividends and interest payments matter; they always have. First, dividends and interest payments give us one of the best ways of determining a company's financial health. Second, dividends and interest payments let us share in the company's current prosperity by paying us a portion of today's earnings – the company treats us like real owners. Finally, dividends and interest payments give us a meaningful way to calculate a company's true value.
Today many investors are tempted to think short-term. We think and manage long-term. We help investors develop a long-term view through education.
Benjamin Graham, who taught investing to Warren Buffett, said, "In the short run the market is a voting machine (a popularity contest), while in the long run it is a weighing machine (a measure of value)."
Based upon the cash flow it can generate for its owners, every business has a true, or intrinsic, value. Any investor who purchases stock in a company without knowing its intrinsic value puts that investment at significant risk. The only hope of profiting from such an approach may be to find a bigger fool to buy the stock some day at a higher price. We feel it is less than responsible for us to invest our clients' assets without knowing the intrinsic value of every security we purchase.
WE USE A RISK AND REWARDS STYLE OF MANAGEMENT
We have spent approximately equal amounts of time over the years studying both stocks and bonds. Because of this, our investment orientation is dictated first by the wishes of our clients, and secondly, by where we believe we can achieve the greatest rewards with the least risk.
FIXED INCOME INVESTING
WSIM has considerable experience in managing bonds and, like most bond managers, closely follow economic trends and developments, three important factors have benefited our clients over the years:
(1) Quality. We rarely get surprised by the fixed income securities we buy because we stick with high-quality issues.
(2) Patience. We deal with each client's account individually and are able to operate patiently, buying or selling bonds only at those times when it appears most advantageous for our clients.
(3) Disciplined Shopping. Working through institutional bond traders we are able to find quality bonds. In the end, experience, sticking with quality securities, remaining patient, and shopping with a keen eye and a measure of discipline is important in our fixed income management.