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18. Endnotes
1Ranking received by the
California Retirement Planners Group, an investment advisory firm now
doing business as IFC Advisory. Heath Biddlecome was a managing
member of the California Retirement Planners Group which is now California
Wealth Management doing business as IFC Advisory. Bloomberg Wealth
Manager’s ranking methodology was as follows:
2003
Bloomberg Wealth Manager’s third
annual ranking of leading independent financial-advisory firms is based
on the average client-account size for the year ending December 31,
2002. The average client-account size is calculated by dividing
the total client assets (which include assets under management filed
on the Form ADV plus additional client assets that are not reported
on the filing) by the total number of client relationships. This
year’s list has 370 firms.
The data used for this ranking were taken from a questionnaire sent to participating firms and from data provided to the Securities and Exchange Commission on Form ADV. Participants were identified through Wealth Manager’s database and from other industry sources. Firms that are listed meet the following criteria:
- Are registered investment advisors
- Stated minimum assets under management of $25 million
- Indicated on the Form ADV that financial-planning services are offered
- Reported on the Wealth Manager questionnaire that comprehensive financial-planning services are provided either in house or via outsourcing
- Declared that more that 50 percent of the client base consisted of “individuals” or “high-net-worth individuals” as defined by the SEC
Because we wanted independent advisory
firms, we eliminated responses from banks, broker-dealer, trust companies,
insurance companies, and their affiliates. Also, firms that are
branches of independent broker-dealers were excluded, as were those
not operating as separate businesses with their own identities.
In cases where firms reported a higher
number of client relationships than client accounts, we used the number
of client accounts as the divisor to calculate the average account size.
The universe of 370 firms is categorized
by the size of assets under management as follows: $200 million or more,
97; $100 million to $199 million, 84; $50 million to $99 million, 115;
$25 million to $49 million, 74.
2004
Bloomberg Wealth Manager’s fourth
annual ranking of leading independent financial-advisory firms is based
on the asset value of the average client relationship as of December
31, 2003. This year’s list has 450 firms, listed in the “Champions”
table.
The asset value of the average client
relationship is calculated by dividing the total client assets under
management (including assets under management reported on the Form ADV
plus additional client asset not reported on Form ADV for which the
firm receives a management fee or advisement fee) by the total number
of client relationships. In certain instances, the value of the
average client relationships for firms listed consecutively will be
the same because of rounding. Their rank order in the table reflects
their relative value when the division is carried out to additional
decimal places. In a few cases, marked with asterisks, the underlying
values are exactly the same, and those firms have been ranked alphabetically.
The data used for this ranking were taken from a questionnaire sent to participating firms and from data that firms provided to the Securities and Exchange Commission on Form ADV. Participants were identified through Wealth Manager’s database and from other industry sources. To qualify for our ranking, firms had to meet the following criteria:
- They are registered investment advisors with the SEC.
- They have minimum assets under management of $50 million.
- The firms must also offer financial planning services.
- More than 50 percent of the firm’s client base must consist of “individuals” or “high-net-worth individuals” as defined by the SEC.
Not included in the ranking are banks,
broker-dealer, trust companies, insurance companies, and firms that
are subsidiaries of larger companies. Also excluded are firms
that are branches of independent broker-dealers and those not operating
as separate businesses with their own identities. A new listing
of firms that would otherwise qualify for our ranking except for the
fact that they are subsidiaries of large organizations is present in
“Medalist” on page 19.
The universe of 450 firms has been
categorized by size of assets under management, as follows: $500 million
or more, 72; $200 million to $499 million, 115; $100 million to $199
million, 135; $50 million to $99 million, 128.
2Value Investors Never
Pay Retail by Anthony Diaz
Value investing is defined as the
process where an investor selects companies whose stocks are currently
undervalued by the market. It has regained considerable popularity
following the bursting of the growth-oriented technology bubble.
Benjamin Graham, widely acknowledged as the father of modern security
analysis, founded the school of value investing in the early 1900’s,
and influenced modern-day investing gurus such as Warren Buffett.
Graham’s value investing treatise The Intelligent Investor
remains the seminal publication on the subject.
If a company with a solid history
of good financials is being overlooked by the market in general, or
if it is being beaten down by the market for temporary reasons (e.g.
a new product launch is receiving tepid consumer reaction, a new movie
is bombing at the box office, the CEO is undergoing heart surgery),
a value investor regards this as a buying opportunity with the expectation
that their prices will eventually rise to their true worth when the
market adjusts or after the company’s temporary issues or problems
are remedied. This can take weeks or it can take years, but it
is at that time when you have the potential of a capital gain.
You must research your investment candidates and their industries thoroughly.
You must also be willing to stand your ground when the pundits and the
stock market in general say otherwise, and be able to let a stock go
when you find that its fundamentals have changed significantly.
Most value portfolio managers screen
first for fundamental measurements such as price-to-earnings (P/E) and
price-to-book (P/B) that are lower than the S&P 500. They
then analyze each company’s financial statements. The key is
not to invest in cheap stocks necessarily, but in those whose companies
are currently undervalued by market over-reaction, misperception, and
short-term focus, and whose stocks have catalysts for potential, long-term
capital appreciation. This will only come from companies on a
sound financial footing and with a good track record.
From this short list of undervalued,
financially sound companies, you conduct a thorough qualitative evaluation.
Review annual reports, SEC filings, press releases, and web sites, and
talk to suppliers, customers, and competitors with the goal of truly
understanding the companies—their management in particular—and the
industries in which they operate.
It is preferable to invest in companies whose management has demonstrated long-term competency and integrity, and whose top executives have they been in place a long time. What suppliers, customers, and competitors have to say about a company can be particularly revealing. If a company is on solid ground with their suppliers and customer base, this can be an advantage against their competitors. In contrast, if a company is constantly having difficulty with key suppliers or distribution channels, this could spell trouble going forward. Similarly, if customers are constantly complaining, or worse, defecting to the competition, this would not bode well. Finally, interviews with the competition can be a harbinger of a company’s shifting competitive landscape in terms of changes in market share, target market, pricing power, and geographic penetration.
Value investing is very methodical, requiring equal doses of quantitative rigor and qualitative insight, and a great deal of patience since it’s a challenge to identify these companies and it can take 3-5 years or longer before the market “bids up” a value stock to its true worth. As evidenced by Buffett’s success and that of many others, however, value investing can be well worth the effort and the rewards can be great to those who commit the time and refuse to pay retail.
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