Stewart Asset Management
In Brief
SAM’s Rationale
Our guiding goal is to double our clients’ money every five years.
When Bill Stewart started WP Stewart & Co. in 1974, the first and most important goal they set was to double clients’ investment every five years. That’s a touch under 15% a year, a rate they’d exceeded at Bill’s previous firm, Ritter Pyne Kendall and Hollister in the prior 11 years. It has remained Bill’s goal for more than four decades.
That target was exceeded at W.P. Stewart & Co. for 38 years and we have significantly surpassed it since we started our new firm, Stewart Asset Management in 2014.
SAM s investment philosophy is a long-term approach, somewhat like private equity investing with liquidity and without leverage. It’s vital to understand that it works best over time.
We’ll find the great businesses to invest in. Our clients need to find the patience to hold them through market gyrations while they grow. It is unlikely to be a steady advance, though markets typically rise about two-thirds of the time.
We invest alongside our clients, we’re their partners.
SAM’s Methodology
To accomplish our goal, we focus on a concentrated universe of the very limited number of large publicly traded businesses that have a high degree of predictability as well as clear growth prospects. This is typically a bit more than 40 companies, never more than 50. These are generally large global businesses with market capitalizations in the hundreds of billions, though we occasionally invest in particularly attractive smaller companies with market caps of less than ten billion dollars. While many of the businesses we invest in are already well known to investors, our concentration on each business’ long-term valuation rather than its near-term prospects offers an advantage in that many investors don’t look out as far as we do. Accordingly, we believe that part of the investment world is often less efficiently priced and more rewarding.
We appraise each of these businesses with a view on their prospective value over the coming decade, developing and regularly updating an in-depth financial model for the coming five years. Regular contact with company managements as well as customers, suppliers and competitors is an important part of our ongoing research.
We typically hold 17 – 18 of the most attractively valued shares in clients’ portfolios, never more than 20. Holdings are reasonably diversified, and our maximum position size is about ten percent. Essentially, we think of our clients’ portfolios as holding companies of great growing businesses. We occasionally add a new “subsidiary* when we can acquire it at an attractive value or sell off another when we are offered a great price. Turnover is typically low. and we often hold positions for many years.
SAM’s Investment Team
While we employ the time-tested investment philosophy and methodology developed and applied by Bill Stewart with gradually evolving teams of analysts over several decades, our present crew of analysts are young and very smart. Each one found their own way to our method of investing clients’ money. They are all dedicated to researching and investing in the same way that the philosophy’s exceptional historic returns were earned.
The team is directed by Tom Valenzuela, formerly Chief Investment Officer at W. P Stewart & Co, and has over 35 years of hands-on experience. Our investment team also includes Steve Powers, CFA (Portfolio Manager & Senior Analyst) and Sam Colleran (Senior Analyst). Bill Stewart still provides an overview and attends nearly all investment meetings, but the investment team does most of the hard work. They are the future. All are or will be owners of our business.