Download Douglas S. Weiss Investment Advisor

DOUGLAS S. WEISS, CFA
INVESTMENT ADVISOR
DECEMBER 2013
EXPERIENCE / EXPERTISE
Registered Investment Advisor (“RIA”) focused on constructing and managing risk
optimized portfolios for individual investors.
20 years investment analysis experience, including:
• Private wealth management at Foster & Foster LLC
• Equity analyst, media & cable industries: Salomon Brothers and CIBC World Markets
• Chartered Financial Analyst (CFA)
Expertise across sectors and asset classes:
• Small and large capitalization stocks
• Health care, agricultural, telecomm, natural resources and manufacturing sectors
• American Depository Receipts (ADRs)
• Preferred Stocks
• Bonds and closed end bond funds
• Real Estate Investment Trusts (REITS)
• Publicly Traded Master Limited Partnerships (MLPS)
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PERFORMANCE
Comparative Returns:
As of 12/28/13
2013 YTD
2012
Average Annual Return, Net of Fees
28.2%
15.8%
(based on 3 separately managed (SM) accounts in 2007/2008, 4 SM accounts thereafter)
2011
2.2%
2010
20.0%
2009
52.1%
May 31 to
Year end
2008
2007
-32.9%
13.5%
S&P 500
Comparative Avg Performance (DSW vs. S&P 500)
1.9%
0.3%
15.1%
5.0%
26.3%
25.7%
-36.8%
3.9%
31.2%
-3.0%
16.0%
-0.2%
-3.3%
16.7%
Data is unaudited and based on monthly balance data provided by Fidelity Investments and Charles Schwab. Returns include dividends
and interest, and are net of commissions and 1% advisory fee, of a composite of all actual accounts larger than $400,000 that were
invested pursuant to adviser guidelines (3 accounts in 2007/2008, 4 accounts thereafter). Returns of the S&P 500, one of the most widely
held investment indexes, are presented for comparison, Allocations of portfolios managed by DSW differ from the S&P 500 stock index in a
number of areas, with important differences being lower allocations to common stock, higher allocations to bonds and cash, higher
allocations to stocks issued by small capitalization companies, and periodic holdings of ADRs and international bonds. Past performance is
not necessarily an accurate predictor of, nor a guarantee of, future returns, and an investment in securities involves the risk of loss.
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PERFORMANCE: GROWTH OF $100,000
Since inception, the average client account has outperformed the market. A $100,000 initial
investment on May 31, 2007, gained $110,600 through December 27, 2013, while an investment
in the S&P 500 would have gained $38,000 over the same period.
See note on page 3 regarding data used for performance calculations. Past performance is not necessarily an accurate predictor
of, nor a guarantee of, future returns, and an investment in securities involves the risk of loss.
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INVESTMENT OBJECTIVE
AND RISK MITIGATION
Objective: construct individual client portfolios that generate better risk-adjusted
long term returns, on average, than broadly available bond and equity indexes.
Return optimization strategies include:
• High allocation to income generating investments to reduce portfolio
volatility.
• Asset diversification across classes with limited correlation, where possible.
• Security selection: Equities, Preferred stocks, REITs, MLPs, and exchange traded
debentures are researched and purchased on an individual basis.
• Closed end bond funds are purchased when trading at unusually wide
discounts to the market value of their holdings.
This information is intended as a discussion of general strategy and investment philosophy and is not a recommendation to purchase any
specific security or type of security.
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LESSONS OF 2008
Despite modest outperformance in 2008, substantial
losses that year exposed weaknesses of a long equity
strategy, agnostic to macro risks. The current portfolio
structure attempts to reduce the risk of a recurrence
by employing:
• Higher levels of cash and short maturity debt
• Closer scrutiny of macro environment in
determination of asset allocations
• Careful avoidance of highly cyclical investments
selling at elevated price levels.
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RESEARCH/INVESTMENT CRITERIA
All research done in-house. Thorough analysis and ongoing review of
companies, including:
• Company financial filings
• Quarterly conference calls
• Investor presentations
• Interviews with company management
Stock Investment Criteria
• Well managed
• Strong balance sheets
• High free cash flow generation
• Defensible barriers to entry
• Positive longer term secular trends.
• Market price below value of discounted future cash flow generation
(intrinsic value).
This information is intended ad a discussion of general strategy and investment philosophy and is not a recommendation to purchase any
specific security or type of security.
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INVESTMENT THEMES
General
• Focus on value and absolute returns. Seek to invest in companies with
sustainable competitive advantages in less cyclical industries.
Sector Themes (Examples)
• Health care – demographics and health insurance trends will increase
utilization but pressure margins on high cost procedures. Focused on
producers and vendors of lower cost health care consumables/disposables.
• Agriculture – Rising population and per capital GDP in emerging markets
resulting in elevated demand growth for grain. Focused on higher value
participants in agricultural supply chain, including farm retailers and specialty
crop chemical producers.
Macro Themes (Examples)
• Corporate bonds and preferred stocks attractive relative to treasuries.
• Demand for higher yielding equities will remain strong as investors search for
income alternatives.
This information is intended as a discussion of general strategy and investment philosophy and is not a recommendation to purchase any
specific security or type of security.
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PORTFOLIO COMPOSITION
• The target portfolio structure seeks to balance growth and income, with an
investment horizon of at least five years.
• Recent economic uncertainty has led to higher allocations to income
generating securities, particularly preferred stocks and floating rate bonds.
Exhibit 4: Sample Portfolio Allocations by Asset Type
Asset Class
Cash and short maturity investment grade debt
Investment grade debentures and preferred stocks
Real Estate Investment Trusts, MLPs, and High Yield Bonds
Domestic and International Stocks
Emerging Market Stocks
Target
Allocation
10%
15%
10%
60%
5%
This information is intended as a discussion of general strategy and investment philosophy and is not a recommendation to purchase any
specific security or type of security.
Holdings and asset allocations are targets, and vary in individual accounts based on a variety of factors including investor preference, risk
tolerance, time horizon, and timing of account opening. Asset allocation (target and actual) and portfolio holdings are under daily review
and subject to change. Actual allocations typically are adjusted over several months to match target allocations.
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HOW IS MY APPROACH DIFFERENT?
• I do not outsource stock selection to mutual funds, which add a second layer
of fees.
• I do original research on all holdings.
• My background is in research and investment management, not sales.
• I follow a broad universe of stocks, including small cap companies. Many
advisers limit their stock selection to large multi-nationals, which tend to be
more efficiently priced.
• I do not have any compensation conflicts or sales directives which could
influence security selection.
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MANAGEMENT FEES, CUSTODY, AND
REPORTING
Management Fees and Account Minimum
Accounts are charged a quarterly management fee of 0.25% based on assets
under management at quarter end. This fee equates to a 1% annual fee, billed
quarterly.
Account Custody
Adviser manages accounts through a third party brokerage account and does
not take custody of assets. Holdings are at all times transparent to client through
brokerage website interface.
Client receives monthly brokerage statements and quarterly manager updates.
Unless otherwise directed by client, adviser manages accounts through Charles
Schwab.
For additional information about the Investment Advisor, please see part two of
Douglas Weiss’ ADV, located at www.dswinvestment.com and at SEC.GOV
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CONTACT INFORMATION
Douglas S. Weiss
878 Lawrenceville Rd.
Princeton, NJ 08540
(585) 969-2726
www.dswinvestment.com
[email protected]
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