©2017 by Brennan Asset Management, LLC  | Napa, California

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In BAM’s investment decision making process involves a number of different factors, not just those discussed in this document.  The views expressed in this material are subject to ongoing evaluation and could change at any time.   Past performance is not indicative of future results, which may vary. The value of investments and the income derived from investments can go down as well as up. It shall not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities mentioned here. While BAM seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark. Although BAM follows the same investment strategy for each advisory client with similar investment objectives and financial condition, differences in client holdings are dictated by variations in clients’ investment guidelines and risk tolerances.  BAM may continue to hold a certain security in one client account while selling it for another client account when client guidelines or risk tolerances mandate a sale for a particular client.  In some cases, consistent with client objectives and risk, BAM may purchase a security for one client while selling it for another.  Consistent with specific client objectives and risk tolerance, clients’ trades may be executed at different times and at different prices.  Each of these factors influences the overall performance of the investment strategies followed by the Firm.  Nothing herein should be construed as a solicitation or offer, or recommendation to buy or sell any security, or as an offer to provide advisory services in any jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.  The material provided herein is for informational purposes only. Before engaging BAM, prospective clients are strongly urged to perform additional due diligence, to ask additional questions of BAM as they deem appropriate, and to discuss any prospective investment with their legal and tax advisers.

Featured Documents

RESEARCH - hidden page

BAM outlines its investment process and rationale for specific holdings in its quarterly letters to investors.

BAM utilizes a handful of guiding principles as it conducts research on individual companies.

Stay Within Circle of Competence

One of the best ways to achieve investment success is to know what you don’t know.  BAM’s expertise is not analyzing cutting edge technologies or finding the next overlooked biotech name.  While BAM is free to invest across any sector, we spend the majority of our time focusing on industries that we best understand while also monitoring particular buckets of investment opportunities that have a history of outperforming.  There are a limited number of hours to research names and therefore BAM seeks to maximize time spent on areas where it has the best chance of investment success while quickly disregarding those where it has no edge. 

 

Maintain Long-Term Perspective

BAM cannot predict where the stock market or individual names will trade next week or next year.  BAM has a better chance of investment success by examining individual company scenarios over 3-5-year time horizons.  By maintaining this longer-term orientation, BAM maximizes its ability to rationally select businesses that may be avoided by those who are seeking more immediate payoffs.  If BAM cannot find compelling opportunities, it will simply hold cash.

 

Financial Modeling/Valuation Analysis

BAM often selects individual securities that are facing perceived or real problems and often are unpopular with other investors.  To have the necessary conviction to purchase out-of-favor names, BAM performs detailed financial modeling work on all current investments.  While the future will always be unknown, BAM attempts to assess the most likely outcomes and forecast a range of values for an individual company under various different scenarios.  This modeling work is invaluable when assessing businesses with complicated structures or limited research coverage.  Additionally, this work helps BAM better understand individual businesses and builds conviction levels to purchase and hold names that others may avoid.        

 

Management Track Record

BAM believes that management’s track record for managing a business and allocating capital (including acquiring other businesses, paying dividends, repurchasing shares) is often a major factor in investment success.  BAM attempts to partner with honest teams with a track record of successful capital management. 

Admit and Learn from Mistakes

One of the few certainties in the investment process is that mistakes will occur; nearly every investor will eventually misjudge a business, misjudge valuation levels or misjudge people.  BAM strives to document its investment rationale to help clarify its thinking and to fight against the temptation to rationalize changing facts/circumstances.  While mistakes are unavoidable, BAM believes its documentation process helps to identify mistakes earlier and to avoid the same errors in the future.

Research Process