Gaineswood investment management focuses upon stock investing in mid-cap ($500 million to $10 billion market value) and secondarily upon small-cap (under $500 million) U.S. publicly traded equities. Our separate accounts are managed in three composites: Core portfolio management, Selected portfolio management, and Long-biased.
To what index do we compare your account performance?
In each type of portfolio management, our style is growth oriented and generally fully invested in equities. Thus, your stock investing accounts are best compared to the Russell 2500 Growth Index. While our average market cap exceeds this index, it is well below that of the Russell Midcap Growth Index. We also sometimes describe your portfolio management performance relative to the S&P 500 and the NASDAQ Composite, because we feel stock investing individuals should consider these most popular vehicles as proxies for “the market” in general, particularly if they give credence to the efficient market hypothesis of stock investing.
Why might your performance differ from the benchmark?
Although elements of the Persistent Growth Investingsm style are apparent at other investment management firms, we believe our stock investing strategies eclectically combine methodologies to produce an interesting product that diverges from the performance of our closest benchmark and other money management companies. Many other portfolio management professionals intentionally shadow their benchmarks closely. They may apply rules to their process that collar performance around an index, such as by maintaining weightings in sectors that parallel a benchmark or by insisting that most holdings be members of an index. Gaineswood simply wants to buy stocks for you that we believe meet our growth, quality, and risk constraints, period. This may cause significantly disparate sector composition. In some portfolio management accounts modest leverage, short exposure, or futures may be used.
Some historical perspective on growth and value:
During the 1990s, growth managers were king of the investment management industry, and FED Chairman Alan greenspan coined the term “irrational exuberance” to describe the era.. However, stock investing indices such as the S&P 500
or the Russell 2500 Growth Index
suffered declines in the years following the stock market bubble. Amidst the ensuing growth stock meltdown, the portfolio management strategies of value managers generally experienced appreciation, but many have yet to make up for the relative performance gap of the preceding decade of stock investing.
Did Gaineswood keep pace in the era of irrational exuberance or melt down when the bubble popped?
In stock investing, past performance is not indicative of future results. However, our portfolio management strategy of combining growth and value enabled us to reap the rewards of growth stock investing when it was in favor, our quality and valuation disciplines enabled us to continue to compound our stock investing profits when value trumped growth in the aftermath. Admittedly, our portfolio management focus on growth stock investing initially eroded account balances when the bubble collapsed, but our portfolio management strategy of persistently holding on to high quality firms and the eventual realization of interesting long-term competitive and trade developments aided our portfolio management record.
Growth, value, and even “GARP” management styles can be flawed.
Although it is difficult to generalize, portfolio management professionals who are growth managers can chase momentum to such an extent they become oblivious to valuation. The stock investing strategy of many value investors leads them to shun new concepts or even entire large sectors such as the technology and medical fields. Most practitioners of “GARP” (Growth-At-a-Reasonable-Price) stock investing buy stocks that trade at low multiples of near-term earnings and whose underlying companies have demonstrated high growth rates. We dub this approach to stock investing “bad GARP,” because our studies indicate heightened risk under these circumstances. Usually something has changed, and anticipated growth is permanently impaired.
The impatience of others can work to your advantage.
We believe that time is the most distorting factor on Wall Street. Our long-term approach to stock investing seeks an entry point into “great” businesses after heroic buying amid disappointment is a distant memory, a time when others are “bored” or have surrendered hope that the future will mirror the past cycle. Our portfolio management philosophy is that often such companies remain fertile platforms for management creativity, just when frustration has caused investors to ignore visible signs of resurrection.
Gaineswood is a knowledge-based investment management firm,
with an experienced yet young team that has a keen interest in portfolio management involving stock investing in high octane parts of the economy such as technology and health care as well as traditional areas undergoing interesting change. Our stock investing and portfolio management philosophies have been honed by the tens of thousands of pages of research that our team members have collectively written for our nation’s most prominent institutional money management firms. We enjoy sharing our insights as well as past successes and failures in investment management, and invite you to contact us
to arrange a meeting or teleconference to discuss how our money management expertise may be helpful to you.