Q. You say your strategy is simple. What‘s to stop me from doing it myself?
A. Nothing really…as long as you wanted to take the time (literally thousands of hours) to research, evaluate, follow and ultimately invest in the stocks we do. Then you will also need a comprehensive knowledge and understanding of options and how to trade them. Most Craven clients would prefer to pay us to do the heavy lifting while they get on with their lives, knowing that they will only be owning dominant companies at compelling prices.
Q. How do you calculate your target pricing?
A. It is a combination of both technical and fundamental analysis. We draw on a number of valuation methodologies, including DCF (Discounted Cash Flow), Reverse DCF, Benjamin Graham, EPV (Earnings Power Value). These methodologies help us to arrive at a number that we believe represents true value. We use that number as a base which we further discount in order to take advantage of Mr. Market’s wild emotional mood swings. There is nothing quite like getting a great deal which is even further discounted because the seller is having a bad day.
Q. How much turnover is in the portfolio?
A. This depends on time and circumstances. Our catch phrase at Craven is “Patient Capital…Positioned for Profit”. The logo shows steps leading from the lower left to the upper right, with arrows embedded. This is deliberate and is designed to illustrate what happens in the typical Fortress Portfolio. A client may invest $1,000,000 with us tomorrow. This amount will sit in cash until an opportunity arises to position that capital. This opportunity typically arrives during wild market swings, at which time we become very active investors for the client, either acquiring positions at target prices or selling options, or both. Ideally, when things settle down again, we are positioned in stocks, collecting dividends and writing additional call options when appropriate. That is the next flat step, until the market becomes agitated / excited again. However, during this time, as you will see from the logo, the arrows continue to move from the lower left to the upper right, which is the trajectory that you always want to see in your portfolio. So…to answer the question…there is ideally not a lot of turnover in the portfolio at all…however, the clients may see extended periods with very little activity, followed by shorter periods of relatively frenetic action. The only turnover that occurs in terms of stock sales is when a stock is “called away”, hits its “stop loss” price or is dropped from the Fortress Portfolio, which is very, very rare.
Q. Is my money with your firm?
A. Absolutely NOT. We are Registered Investment Advisors only. We do not custody client assets. Your money will be with the custodian of your choice e.g. Charles Schwab, Fidelity, etc. You provide us with your authority to manage those assets but nothing more. We can only enter orders to buy or sell securities on your behalf. We cannot withdraw or transfer funds. There are plenty of examples…from Madoff to MF Global…that teach us that we need to be very cautious about where we put our assets. If clients need us to, we will work with them to find a custodian which they feel comfortable and secure with.
If you have an investment related question that you would like to see answered and featured in this section, please complete the form under the CONTACT US link and we will be happy to do so.