What is Value Investing?
Our value philosophy is centered around a very simple concept: buying businesses for less than they are worth can create long-term wealth for investors.
Central Tenets of Value Investing
Price Does Not
The value of a stock is measurable and driven by fundamentals
Risk is a Permanent
Loss of Capital
Volatility is not risk
but instead provides opportunity
Purchase Price is Paramount
Attractive long-term returns can be generated by paying conservative prices for good businesses
Why Value Investing?
We utilize a fundamentals-based value philosophy in security selection because value approaches have outperformed the broad equity market over long periods.¹ We believe this outperformance demonstrates that market values of stocks ultimately come to reflect the fundamentals of their underlying businesses.
Our Equity Investment Approach
FRM's equity approach centers on the pursuit of intrinsic value. The price we pay for a security is critical in providing an attractive return on our clients’ capital as well as protecting our clients against a permanent loss of capital. This potential for permanent loss of capital is how we define risk. Our approach requires patience and a willingness to think independently from the market. We perform our own research to determine which stocks to add to portfolios. Our goal is to pay an attractive price for a stock based either on the company’s proven ability to earn or the value of its assets. We apply an ownership perspective to estimate the "intrinsic value" or what the company is worth. We then establish our "buy" target price well below this assessment of value to allow a margin of safety for an adequately rewarding return on our clients' capital. We continuously monitor the company's fundaments for changes to our estimation of intrinsic value and remain disciplined in only purchasing stocks when we can do so at a discount to our estimate of worth. We have a composite track record of managing equity portfolios since 1990.
Our Fixed Income Investment Approach
Our fixed income management is structured to safeguard capital while generating current income. As value investors, we demand that we be well-compensated for taking any of the various risks present in fixed income securities. We attempt to leverage our research in the stock market to add value when investing in corporate bonds. Risk premiums are frequently attractive on the companies we study the most, since the bonds will tend to be out of favor in parallel with the stock of the company. We have a composite track record of managing fixed income portfolios since 1988.
More Information about our Track Record
FRM claims firm-wide compliance with the Global Investment Performance Standards (GIPS®), an industry-leading, ethical standard for calculating and presenting investment performance based on the principles of fair representation and full disclosure. Additionally, FRM has completed the voluntary and rigorous process of having our policies, procedures, calculation methods and disclosures verified by an independent party for the period January 1, 2000 - December 31, 2019. GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. A copy of FRM’s GIPS-compliant performance information is available by contacting Abby McKelvy at .
¹ Among the most well-known studies documenting the long-term outperformance of value strategies is the 1992 paper by Eugene L. Fama and Kenneth R. French titled "The Cross-Section of Expected Stock Returns," published in the Journal of Finance. Available here: www.jstor.org/stable/2329112. This 1992 study analyzed investment returns from July 1963 through December 1990. The same two authors updated their analysis though June 2019 in the working paper titled "The Value Premium" written on January 1, 2020. Available here: https://ssrn.com/abstract=3525096