In our first quarterly letter of 2016, we reminded you of why we continued to invest according to what we consider to be the
three “pillars” of our approach to portfolio construction; specifically, that investment returns may be enhanced by the
inclusion of small company stocks, investing with a “value” bias, and international diversification. After a prolonged period
of these three underperforming versus owning a portfolio of very large companies, we found ourselves in the uncomfortable
position of having to defend our stubborn adherence to our guns.
When we talk about the stocks that typically populate our mutual fund portfolios, or as you read the commentary from the funds you own, you might occasionally notice reference to the concept of “capital allocation,” most commonly in a context like, “The managers of company XYZ are skilled capital allocators.” So, what do we mean by capital allocation, and why is it important?
Medley & Brown Blog
Around 1986, I read my first article about Warren Buffett in New York magazine. Of particular interest was that Buffett, and his partner, Charlie Munger, would answer questions from shareholders at the annual meeting of their company, Berkshire Hathaway. The questions—always about investing money intelligently—would often go on for a period of two hours. I bought the stock right away so that I could go to the annual meeting in Omaha even though my wife, Jean, was asking, “Can’t you just buy a tape of the meeting?” (Actually, not until this past spring has there been any public recording of the meeting.)
In the Deep South, you don’t have to look very far in your circle of friends to find someone who owns land or other types of real estate. Perhaps it is land that is farmed for crops or timber, maybe it’s prime hunting ground that’s been passed down from generation to generation. Or it could be the site of a soon-to-be dream home. In addition, many people own a second home or a condo in Oxford, Starkville, or Destin. While each of these investments may generate significant sentimental worth, enjoyment, and perhaps income, should they be viewed as good financial investments?
Meet Our Team
Tim C. Medley
Tim Medley has been in the investment business since 1967, founded the predecessor to our firm in 1988, and was the first person in the State of Mississippi to be awarded the CFP® certification.View Profile
Eddie Carlisle, CFP® joined Medley & Brown, LLC, in May 2006, having previously practiced law for five years at Watkins & Eager, PLLC.
Eddie serves as the firm's Chief Compliance Officer.View Profile
Doug Muenzenmay, CFA, CFP® joined Medley & Brown, LLC, in April 2010. Doug has 24 years of capital markets experience including portfolio management for individuals, institutions and endowments.View Profile
Julius Ridgway, CFA joined Medley & Brown, LLC, in July 2002. He has over 15 years of direct investment experience, and spent the previous ten years involved in various aspects of financial services, banking and real estate.View Profile
Quotes & Commentary
Since 1926, the market’s cheapest stocks have outperformed their more expensive counterparts by 4.6 percentage points annually, according to data assembled by Dartmouth’s Kenneth French. But that was then. Since February 2007, the cheapest stocks in the U.S. have lagged their more expensive counterparts by 2.6 percentage points annually....