Bernie is a long-term, value-oriented investor who applies his skills and intellectual curiosity in security analysis, behavioral finance, forensic accounting, and investigative research to gain insight into each potential investment’s long-term fundamentals. Having analyzed businesses since 1984 and managed money since 1991, Bernie has experienced three bear markets and has learned from each—all of which has affected his judgment and his investing strategy.
Bernie has a strong background in fundamental, Graham-Dodd security analysis, statistics, and pattern recognition. These factors have contributed to his success, fostering independent, rather than consensus, thinking and, in the process, reducing the risk of investing in overpriced securities and bubbles. To that end, he places limited value on whether last quarter’s earnings met consensus, the short-term economic forecast, or which sectors are likely to be “hot.” Instead, he focuses on stress-testing and valuation, and in making long-term investments in good businesses with owner-oriented management and conservative finances that are selling at attractive prices. As a result of hard work and discipline, the wealth of Bernie’s clients has increased over multi-year periods. He believes that an important component of this has been an investment approach that mitigates losses during bear markets.
Portfolio Construction and Management
When evaluating potential investments, Bernie values:
- Strong underlying fundamentals, as evidenced by a high return on equity (ROE), limited financial leverage, high barriers to entry, enduring competitive advantages, and significant cash generation
- Good management focused on building shareholder value, logically deploying free cash flow, employing conservative accounting, and responsible compensation
- An attractive valuation, defined as a minimum 50% estimated total return in a three-year timespan
- Mispriced special situations, such as spin-offs and restructurings of strong business franchises that offer compelling risk/reward potential
- The prospect of long-term holding periods, in order to benefit from the positive impact on pre-tax compounding