Review & Outlook

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Our Investment Philosophy

6 October, 2010 by admin in Philosophy

Our investment philosophy is straightforward. We seek the preservation and growth of capital through good and bad markets. Our experience shows that a balance of value stocks, growth stocks and investment-grade bonds is the best allocation of assets. Stocks tend to appreciate over time while bonds generate income and limit risk. Such an all-weather discipline holds value in down markets and participates in up markets.

The firm provides core investment advisory services for institutions and individuals whose portfolios are not large enough to hire multiple money managers representing multiple styles (such as value, growth, contrarian). Clients depend on O’Brien Greene & Co. to provide a reasonable return in good markets and bad markets; thus relative return (return as measured against an index) is important but absolute positive performance tends to be more important for clients. That is to say, clients want to preserve principal and see inflation-adjusted growth so as to ensure that purchasing power is maintained, but they do not want to risk big short-term losses in order to outperform a hot stock market index.

With this goal in mind, the firm uses a blend of growth and value stocks and investment-grade bonds in all institutional accounts. This is the all-weather diversification system. The firm will purchase so-called growth stocks but is not a momentum investor, that is, one who buys stocks that are going up because they are going up. The firm believes that notions of value and growth come in and out of fashion. The investor who avoids the extremes of growth and value for the middle way can reduce overall risk while participating in the best features of each stock class. Thus O’Brien Greene is a risk-adjusted investor. Equity turnover is low at 25 to 30% a year. Unless an industry or company fundamental has changed, the firm prefers not to sell a stock. The firm typically owns thirty stocks diversified across the economy.

As for bonds, the firm uses only investment grade bonds deemed suitable for a municipality or a bank trust department. It does not use derivative securities. Different bond classes (corporate, Treasury, government agency, mortgage-backed) come in and out of fashion. On the basis of what is currently attractive, and not on the basis of economic forecasts, the firm puts money into a bond class from short to long term.