These investment principles form the foundation of our philosophy and approach to portfolio construction.
See our results.
Conduct Our Own Research
We perform all our own original research in-house, which gives us a formidable edge over the market. When investors perform limited research of their own or depend heavily on the work of others, it can lead to a lack of conviction and misplaced responsibility. Because our research is our own, we have the insight to trust our process and to maintain conviction in our positioning.
Most of the world’s greatest investors, including Warren Buffett, have been value-oriented. To generate long-term success, it takes significant analytical effort, discipline, a long-term horizon, and the willingness to go against the crowd when prudent and necessary.
Every investment decision at Black Cypress, whether in determining capital allocations to different asset classes or in selecting a particular stock, is rooted in the tenets of value investing. We invest in companies as if we are buying a business in its entirety, becoming partners with management. We invest when the price we must pay is adequately lower than the value we will receive. And we let the market work to our benefit, by taking advantage of periods of market enthusiasm to sell and periods of short-sighted and widespread fear to buy.
Black Cypress invests with a multi-year time horizon in mind. Our competitors, bound by short-term performance expectations, make decisions based on what may happen in the next couple of quarters. We instead concern ourselves with each of our investment’s long-term (5 to 7+ years) return potential–not whether a company will beat earnings estimates in the next quarter or whether an asset class is currently out of favor. Our unconstrained time horizon leads to better-controlled emotions, lower turnover, and superior decision making.
Studies have shown that a portfolio of 18 properly-selected common stocks provides more than 90% of the benefits of diversification. Also, as the number of individual securities in a portfolio increases, the impact of each position on investment returns declines.
For these reasons, Black Cypress builds concentrated portfolios with typically no more than 20 individual domestic stocks for its clients. Our approach therefore maximizes the benefits of diversification while still allowing our individual investment ideas to each meaningfully impact our returns.
Manage Risk First
Large losses cause a multiple of damage. A 50% decline requires a 100% return just to get back to break-even. Because of this mathematical reality, Black Cypress focuses first on managing risk. We view and manage portfolio risk by focusing on mitigating company-specific, valuation, and capital cycle risks.
See our results.