THE BLOG

29
Sep

How Have I Changed?

Content provided by Rusty Vanneman, CFA, CMT, Chief Investment Officer

I’m often asked by investors, now that I have 30 years in the industry under my belt, how I have changed as an investment professional over the years.

It’s a good question and, frankly, it should be asked of every investment manager and advisor. The answers will likely be nuanced and perhaps not as easy to discern as trying to find the difference in the following photos:

***

Could you spot the difference?

So, how have I changed as an investment professional? At the core, I think I have always been a value-oriented investor with a contrarian sensibility. That has never changed. My personal attributes and my mission haven’t changed either.

While my analytical and portfolio management skills have surely been refined by years of experience, including multiple bull and bear markets (both in absolute and relative terms), I don’t think my peers, associates, or clients from the early years in my career would be surprised at what they see in me now.

What has changed the most is I have come to fully realize that being a good investment professional isn’t just about a number or portfolio return. The true goal is creating success for investors through my overall portfolio management. That means building attractive portfolios and providing the necessary communication and service to support the investors’ experience.

Let’s break that last sentence down.

I believe an attractive portfolio behaves as an investor expects. It doesn’t surprise or disappoint investors. The portfolio behavior is key. Does it behave as expected when prices move higher? Does it behave as expected when prices move lower? Surprising behavior, even when the markets go up, doesn’t necessarily provide comfort.

Creating an attractive portfolio goes beyond the selection of stocks and bonds. It also involves communication. Some recent feedback from advisors was that our investment team’s communication at CLS was commonsensical and transparent. Bam. That’s exactly what we strive for.

I believe successful communication should:

  1. Explain how markets work and educate investors. I have found my presentations on market history are way more useful to investors than the reviews of economic charts that I used to emphasize early in my career.
  2. Manage expectations in the context of the current market environment. For example, if valuations are high, such as they are now, expected returns should be lowered. Investors often get too high or too low. The key is to educate and manage expectations and bring investors back to center and back into balance.
  3. Maintain regular and reliable communications — and provide access at all times.

Early in my career, when I worked at Fidelity Management and Research in Boston, I had an opportunity to ask the head of the department, Gary Burkhead, who had such notables as Peter Lynch, Jeff Vinik, Joel Tillinghast, Will Danoff, and many other great investment minds and managers work for him, what made a great manager. He said it wasn’t the brilliance of managing a portfolio, it was the ability to communicate and keep investors confident and comfortable in their capabilities through all market environments. I always remembered those words. But, to be honest, I didn’t completely embrace them until years later when I learned that success wasn’t determined in my portfolio’s returns, but in my clients’.

3019-CLS-9/29/2017

28
Sep

The Prospect Portal: A Powerful New Tool for Advisors

In today's Orion Weekly, we’re discussing Performance Attribution and previewing the Prospect Portal, a powerful new tool for advisors.

The post The Prospect Portal: A Powerful New Tool for Advisors appeared first on Orion Advisor Services.

27
Sep

Market Performance Around Crisis Events

Content provided by  Kostya Etus, CFA, Portfolio Manager

Mr. Market may give a nod to a geopolitical crisis but is really more concerned with economic strength and corporate profitability. While a crisis may weigh on the economy, it is typically not the case.

There have been a lot of headlines recently about North Korea, Venezuela, Charlottesville, and other hotbeds that could result in crisis-type situations — should investors be worried?

Ned Davis Research has compiled a list of 53 historic crisis events (listed below). It evaluated U.S. market performance during the crisis reaction dates as well as performance during subsequent time periods.

As expected, investor emotions (fear) resulted in a negative 6.6% average return during the crisis; but over the following one-month, three-month, six-month, and one-year periods, the returns were positive. The loss of the initial reaction netted out by about the six-month mark, and the market returned a staggeringly positive 14.2% average return over the year following a crisis.

One way to help prepare for the future is to learn from history. Let’s take a closer look at some specific events:

  1. Political Crises – On the list we have the Eisenhower Heart Attack, JFK Assassinated, and Nixon Resigns. Averaging those three events you get a -9% reaction drop, with a positive 13% return six months out and a 19% return a year out.
  2. Nuclear Threat – There may have been several close calls during the Cold War, but the main one that comes to mind is the Cuban Missile Crisis. The reaction to the event was not even a market drop, but one year after, the U.S. market was up a stunning 30%.
  3. Terrorist Attacks – Focusing on those within the U.S. we have the Boston Marathon and Oklahoma City Bombings, as well as the two World Trade Center Attacks. Average reaction drop is just under 4%, and one year out an average 12% upside.

One lesson learned here is that the market typically goes up over the long term. Thus, staying invested and diversified leads to a better investor experience and higher chance to achieve retirement goals.

Additionally, as Warren Buffett likes to say, it is wise to be “fearful when others are greedy and greedy when others are fearful.” CLS likes to take advantage of what the market provides instead of trying to predict the next crisis. If a crisis does develop, we will use it to our advantage to buy assets at a discount.

(Click to Enlarge)

2917-CLS-9/5/2017

26
Sep

How Can I Use Performance Attribution?

View factors contributing to your portfolio performance in Orion Insight. Compare portfolio performance vs the benchmark, with Performance Attribution.

The post How Can I Use Performance Attribution? appeared first on Orion Advisor Services.

22
Sep

The Arranger

Content provided by Robyn Murray, Freelance Writer

It takes a lot to get Patty Colombe down. Naturally sunny and cheerful, Colombe believes in staying positive in the face of adversity.

But, she’s had her share of trials. Over the last few years, Colombe lost her mother and nearly lost her grandson in a car accident. “When mom got sick and Dylan got hurt,” she recalled, “that was life changing.”

It all happened around the time Colombe started at CLS Investments as an administrative coordinator. It’s a position that requires taking care of people, and as a natural caregiver who likes to see the best in others, she’s a perfect fit.

***

Patty Colombe was born in Iowa, but she’s spent most of her life in Omaha, Neb. Her father sold life insurance and was transferred to the city when she was 7 years old. Her mother stayed home with her three daughters until they were in high school. Then she went to work at an ophthalmologist’s office as an administrative assistant.

Colombe is the youngest of the three daughters and — she added with a grin — “Dad’s only son.” A lifelong tomboy, Colombe says she was always the one called on to help her father with household projects. “Whenever there was something needed to be done,” she said, “I’d be out there swinging a sledgehammer or doing something in the yard.” Colombe’s outgoing personality also comes from her dad. “When my father entered a room, you knew he was there immediately,” she said.

Colombe took her first job when she was 14 manning the counter at Dairy Queen. At 15, she went to work for Hickory Farms and stayed there until she graduated high school. She later worked for a heavy duty parts supplier. But, after she was married with two small children at home, she decided — in a typically resourceful move — to run a daycare out of her house so she could be with her kids.

When her children were older, Colombe took a job as a sales assistant for an agricultural company. She didn’t stay in that position long. “I kept fixing computers,” she said, “so, they stole me out of sales and moved me to IT.” Colombe was ultimately promoted to IT manager and was in charge of 13 locations and 728 users.

But after 20 years there, the company was sold to China and started outsourcing positions. Colombe was laid off, and that was the beginning of some profound shifts in her life.

One of those shifts happened when her grandson crossed the street at a busy intersection in West Omaha. He was with a group, but he and a friend were trailing a little behind. The driver didn’t see them. She hit the two boys at 45 miles per hour. Dylan flew into the air, and his friend crashed into the windshield and hood of the car.

“But they had angels,” Colombe said. “There was a doctor and a nurse right there. Everyone got out of their cars, and they told them what to do with the boys while they called an ambulance.” Dylan’s friend is still getting facial reconstructive surgery, but he’s OK. Dylan spent three weeks in the hospital and three more at a Madonna Rehabilitation Hospital in Lincoln, and then went home in a wheelchair.

It wasn’t long after that Colombe’s mother became ill and went into hospice. Just a few months later, she passed away.

“Losing my job after 20 years, and then having all that happen . . .” Colombe trailed off. “The people are so nice here. It’s a wonderful group of people.” Her new colleagues at CLS kept her busy and gave her their support. She recalls coming to work shortly after the accident and being encouraged to go home and be with her family. “Family is very important here,” she said. “Everybody goes home and appreciates what they have at home, as well as what they have here.”

Patty Colombe (second from right) with her family.

Today, Colombe’s grandson is playing baseball again, and her father recently celebrated his 87th birthday.

“Within that story,” she said, “is a story of survival.”

Colombe says she’s taken lessons from the experience. “You’ve got to like what you’re doing, and you can’t spend a whole lot of time worrying about the stupid stuff.” At CLS, she loves what she’s doing — and that’s mainly because she gets to take care of people. “I love people,” she said. “There’s something different about everyone. And most everyone, there’s something good.”

Colombe supports CLS’s CEO, Ryan Beach, and the CIO, Rusty Vanneman, as well as the Portfolio Management Team. She schedules calendars, makes travel arrangements, and files expenses. She also keeps the portfolio managers on top of their writing tasks and takes tedious assignments off their desks. “Little things,” she said. “I just help get their ducks in a row.”

Colombe’s ability to take care of things was noted in a recent strengths finder assessment at the company. She was the only employee with “Arranger” as her No. 1 strength. Arrangers, the description says, are organized and flexible. “They like to determine how all the pieces and resources can be arranged for maximum productivity.”

Colombe emailed the description to me. She doesn’t like talking about herself. She’s a doer, not a talker, she says. But, that’s why she gets things done. And, why Vanneman says she’s become an indispensable member of the team.

“I’m a caregiver,” she said. “I like to take care of things.”

2973-CLS-9/20/2017

21
Sep

What’s New with Orion Social?

What’s New with Orion Social? The latest update gives you more efficiency, detail, and transparency – explore the update and more in today's Orion Weekly.

The post What’s New with Orion Social? appeared first on Orion Advisor Services.

19
Sep

Extend Your Capabilities with Cloud-based Trading

A trading platform is as powerful as the technology behind it, and Orion’s cloud-based trading is scalable and upgradable at a moment’s notice.

The post Extend Your Capabilities with Cloud-based Trading appeared first on Orion Advisor Services.

18
Sep

Orion Ascent 2017 Starts Today

In our Ascent video series, our two advisors have finally reached the top of Camelback Mountain so they can register for Ascent 2017 too

The post Orion Ascent 2017 Starts Today appeared first on Orion Advisor Services.

15
Sep

Q&A with Christopher Davis, Portfolio Manager at Davis Funds

CLS’s Chief Investment Officer, Rusty Vanneman, CFA, CMT sits down with Portfolio Manager, Christopher Davis, Davis Funds and explores what it means to be a good individual investor, what characteristics a respectable financial advisor should possess, and what a financial advisor should look for in a professional money manager.

14
Sep

Currencies’ Impact on Portfolios (and My Honeymoon)

Content provided by Joshua Jenkins, CFA, Portfolio Manager

Over the last year, currencies have been on the forefront of my mind, which is unusual. I’m not saying they are not important. In the short term, they definitely impact returns. Portfolio Manager Case Eichenberger recently wrote about that here. Over the long term, however, the impact of currency fluctuations tend to net out to zero. As long-term investors, we are generally comfortable taking on currency risk if the asset we are buying is priced attractively.

So, why have I been thinking about currencies so much? Well, my wife, Kirsten, and I were married this August, and immediately after the wedding we traveled to Europe for our honeymoon. While I may be a long-term investor, I am not a long-term honeymooner. Suffice it to say the recent dollar move definitely had an impact.

We did not choose Europe last fall specifically because the euro was trading at the weakest level to the dollar in 15 years, but believe me that fact did not go unnoticed by me. So, as I spent 2017 watching my trip becoming more and more expensive, it was painful. Fortunately, we locked in a substantial portion of the cost in April by prepaying for hotels and flights to various destinations in Europe. At least we were partially hedged.

(If you look closely, you can see me calculating how much more I had to pay for the gondola ride due to the euro rally. Just don’t tell Kirsten.)

The chart below provides some rough evidence that currency moves even out over time. During the last 50 years, rolling 12-month returns on the Dollar Spot Index (DXY) generally resemble a normal distribution with a return of 0.01% on average.

As Case’s blog pointed out, weakness in the dollar has provided a very nice tailwind for our international holdings at CLS this year. In addition, according to the table below from Ned Davis Research, when sentiment towards the dollar (red line) is as sour as it is today, the dollar typically continues to underperform to the tune of 5% to 8% per year. To put it another way, this tailwind may persist, and that should generally be a postive outcome for CLS portfolios.

So, if you are planning a trip overseas in the near future, some attention may be warranted. Perhaps hedging a portion of the expenditure ahead of time could be beneficial. Though I was better off having hedged, my experience tells me it does little to reduce the mental pain of the unhedged cost. For long-term investors, enjoy the tailwind while you have it. Just remember — honeymoons aside — the long-term impact of currency fluctuations doesn’t need to keep you up at night.

2956-CLS-9/14/2017