Investment Philosophy

The biggest risk to investors is not a calculated number based on measures of volatility and variance, but a permanent loss of capital. Permanent loss of capital can be greatly reduced by buying a stock with a margin of safety based on its intrinsic value. These are the axioms of a value investment discipline laid out in 1934 by Ben Graham and built upon by other well known investors, such as Warren Buffett, Seth Klarman, and others.

Seaway Advisors’ investment philosophy is simple to explain but difficult to execute. We are dedicated to achieving superior returns by buying a relatively few high-quality businesses at prices that afford a margin of safety. History has proven that this is one of the most reliable approaches to preserving and growing real wealth. Yet, few can do this right because it requires immense discipline, patience, and independence of thought. One has to have independence of thought and be a contrarian in order to buy a stock that is out of favor yet have the investment discipline to separate “cheap” from “value”.

Sell Discipline

It is often taken for granted but the sell discipline can be as important to performance as the purchase discipline.

We will sell a position when:

  1. We reduce our appraisal of the business due to diminishment of competitive advantage, erroneous analysis, or poor corporate management decisions.
  2. Price of our holding appreciates significantly relative to appraised value.
  3. Better opportunities are found.

Other Thoughts

Ben Graham wrote his seminal piece which became the foundation for modern securities analysis in 1934.  It is a testament that his work has stood the test of time. Today’s markets have changed becoming much more volatile due to the activity of global financial firms with immense leverage.  Today’s economy is much more global, such that growth or recession in other regions has an impact on our economy and markets. Central banks around the world, including our own Federal Reserve, have become much more interventionist with a resulting impact on interest rates, currencies, and economies. The strength of a company's business and its ability to generate and grow cash flow is even more critical to long-term investment success in meeting the challenges of today's global economy.

 

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