Advise for the Long Term but Don't Miss Short-Term Opportunities
Source: FA-IQ, Jun. 28, 2018
RITA RAAGAS DE RAMOS, SPECIAL PROJECTS MANAGER, FINANCIAL ADVISOR IQ: Hi, I'm Rita Raagas De Ramos from Financial Advisor IQ, and with me is Steven Check, president of Check Capital. Your firm believes in long-term investing, but when markets are volatile you see this is an opportunity. Could you talk a little bit more about how exactly does the volatility in the markets affect your asset allocation?
STEVEN CHECK, PRESIDENT, CHECK CAPITAL MANAGEMENT: Well, we take the view that the markets are really there to serve us, to give us opportunities. So when the market's volatile stocks are say down that's usually when we can find our best values. So we look forward to volatility. That can help us out long term.
RITA RAAGAS DE RAMOS: Your firm mostly invests your clients' assets in direct investments. Are they mostly in stocks or in bonds?
STEVEN CHECK: Well, we help clients out with both stocks and bonds. But bonds are for our clients' short-term money and stocks are for, let's say, the three-, four-, five-year and longer type of money. But most clients are hiring us really for our stock expertise.
RITA RAAGAS DE RAMOS: Why have you decided to use this strategy of investing more in direct investments rather than more in mutual funds and ETFs?
STEVEN CHECK: Well, partly it might be my age. But I've been doing this for over 30 years and 30 years ago there weren't things like ETF. Mutual funds were becoming quite popular. But really it was stock picking, is how it all started. And we've just stuck to that. When you own stock, you recognize that you're becoming an owner in a business, you're trying to identify good businesses, trying to buy them at good prices, and frankly mutual funds and ETFs are doing the same thing but in a somewhat indirect manner and with maybe a lot more securities, you know, in a particular fund. So we'd like to find a focused portfolio of very good, high-quality companies' stocks and then buy them at good prices.
RITA RAAGAS DE RAMOS: Because you mostly invest directly in stocks and bonds, does this mean that your investors tend to be more nervous when markets are volatile?
STEVEN CHECK: We find kind of the opposite because we find that when they own an individual company, if they own FedEx or if they own Coca-Cola, they know what they own. And if those stocks go down in price after they feel that we bought them at a good price for them, they could feel comfortable that those stocks will come back up. Whereas we find that people that own an index fund or something are more worried about the overall market and really aren't identifying with the fact that they actually are owners in a business.
RITA RAAGAS DE RAMOS: How are you picking the stocks and bonds that you recommend to your clients?
STEVEN CHECK: Yeah, there's certainly just all kinds of stocks to pick from, right? I'm not sure how many of these days but you know 5,000, 10,000 stocks. We've narrowed it down to only around 150 companies that we think are of the quality -- meaning the durability, the long term growth characteristics are intact -- that we'd like to buy their stocks and at a good price. So they're generally relatively large companies, large and mid-cap stocks. Their companies are usually highly rated by Standard and Poor's in terms of their stock ranking and they're companies that we have with our own analysis would say that we think that company is going to be a leader in its industry five or 10 years down the road. And then the key is to just buy those companies' stocks, again at a good price.
Now, that's not easy necessarily because you have to be very patient and disciplined and buying as you said initially when there may be volatility.
RITA RAAGAS DE RAMOS: How actively do you manage or reallocate your asset allocation?
STEVEN CHECK: Well, we own only roughly 20 stocks so it's a relatively focused portfolio first of all. And we find that we usually own an individual stock maybe about four years. So we have relatively low turnover, maybe 20% of the portfolio each year, but we're trying to buy good companies' stocks at a good price and then when those prices rise and let's say it's a more fair price for the stock we'll take our profits and look to buy something else as cheap again.
RITA RAAGAS DE RAMOS: Thank you Steven.
STEVEN CHECK: Thank you Rita.