Kent Shaw, CFA

Every day is different. That's one of the things I enjoy most about this industry. There are thousands of companies to investigate to find new and fruitful opportunities for client capital. And the market environment itself is changing constantly. What we see today is likely similar to some prior period. And I can use that history and the relationships I have with people who experienced those periods firsthand to estimate risk and return.

But still, no two days are exactly the same. That's one reason why I place such a high emphasis on bringing clients into this process to educate them on what can be a very complex environment until they are comfortable. Some clients want to know all the details and others are content to hear periodic summaries and leave the rest to me. Both are rewarding relationships.

One of the most important lessons I've learned from my time trading currencies that has helped me when managing client assets is the importance of understanding and managing risk. Diversification is a wonderful tool, but it is no substitute for reducing exposure to riskier assets such as equities when times are uncertain and the reward is difficult to estimate. I have a quote on my computer monitor from Tom Basso, a well-known trader and hedge fund manager.

He has a reputation for having less volatile returns than his peers, which is reflected by his quote, "Loss of opportunity is preferable to loss of capital. I'm confident I can find another opportunity if I miss one, but my clients have worked hard for the capital they have entrusted to me, and that should always color my thinking when I put capital at risk." One of the ways I try to put that into practice is by making gradual changes over time.

Whether it be in the total amount of assets invested in stocks or the amount invested in a single stock, new information arrives every day that can support or refute your investment thesis. Making changes over time rather than all at once can allow you to weigh more evidence while also taking action. Another important lesson is that you should never be afraid to reverse your decision.

Holding to a decision simply because you've done so for some period of time is a foolish reason to continue to do so when new information is presented. The investment markets don't care about your personal agenda. You can't be afraid to change your mind and take an opposite action. Patience is an asset. If the current environment shows high risks and uncertain rewards, focus on protecting capital and learning about companies that may be good investments in the future when conditions improve but limit exposure.

Investing and researching investments is an odd pursuit. It's not like exercise or sport where daily efforts will be rewarded within a few months or less. In investing, when the opportunity set is poor, it's best to reduce exposure and wait for better opportunities. Understanding the power of trends in stocks, industries, and asset classes is incredibly important to long-term success. I've spent many years studying stocks and industry trends that worked well in the past to improve my odds of success in the future.

Valuation of an asset can be incredibly helpful for context of a decision to buy or sell, but it has historically been a terrible timing tool. A stock's valuation is influenced by many factors we can measure, but most comparisons by professionals are done using only a few of the factors while omitting some very important ones. That's because complex and thorough analysis can be difficult.

What are tax rates in prior periods? Is the company more profitable now in terms of return on invested capital than in prior periods? Are there more or fewer competitors in the industry today? One of the many benefits of working at MONTAG is that I have and keep a short list of clients who I come to know and care for personally. I get to see a child head to college because of their parents' discipline, trust, and patience in our investment management.

I get to see a couple retire comfortably and begin planning their first big trip together. I see families learn how to begin sharing investment wisdom with a second or third generation as assets are handed down. I have clients here, not numbers on a computer screen.