Tuesday, February 5, 2013

The Strategy

The idea driving the strategy that will be implmented here is that companies that have high returns to shareholders, are priced attractively relative to their earnings, and manage their cash balance prudently tend to dramatically outperform the S&P 500 over time. These are not new concepts from an academic perspective, but their potential is significantly overlooked by the major mutual fund complexes on the justification the resultant portfolio's don't fit their client's needs. At Mercury Global Holdings, the top client need we strive to meet are very high risk adjusted returns compounded over long periods of time. Artificial market constructs such as Market Cap Weighting, Growth/Core/Value, or Style approaches like Long/Short, Market Neutral, Event Driven are ultimately irrelevant to us. Our approach to identifying investments and managing those investments is quite different from Warren Buffett, but we agree on this:

"Fund consultants like to require style boxes such as 'long-short,' 'macro,' 'international equities.' At Berkshire our only style box is smart." -Warren Buffett

We wil never dilute our approach to facilitate the marketing of our funds. The performance of our funds should be our primary source of marketing.

Without further adue here is the initial suggested model holdings for the inception date of 2/4/2013. These holdings are adjusted in the actual portfolio for reasons such as: previously unreported stock moving news, risk management activites, trade timing and execution, portfolio manager views on most likely outperformers. The specific holdings will be posted with a 1 week delay to the model suggested output and the initial universe is from the union of the Russell 3000 Index, the Russell Microcap Index, and the Russell Global Europe Index.

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