Category: Personal Interest

19
Nov

The Builder

Content provided by Robyn Murray, Freelance Writer The first thing to know about Chad Boyer is that he likes to build. It’s a trait that stretches back through a line of brick layers and concrete masons to his great grandfather. “I worked from the time I was probably 10 years old,” Boyer said. “I’ve always...
20
Apr

10 Years Later: Lessons Learned from the Global Financial Crisis

Content provided by Rusty Vanneman, CFA, CMT, Chief Investment Officer Question: Ten years have passed since the onset of the financial crisis. What about the past decade has changed your thinking about the economy, financial markets, or investing?  While I honestly think most of my investment philosophy and approach remains essentially the same, there are degrees of emphasis that have...
02
Feb

What Should Investors Read?

  Content provided by Jackson Lee, CFA, Quantitative Investment Research Analyst Over the past couple of decades, advancements in technology have made a positive impact on the investment industry. For average investors, one of the biggest benefits is the availability and accessibility of data and information. Thanks to the advent of mobile devices, investors now...
27
Dec

Time to Give

Content provided by Robyn Murray, Freelance Writer Meghan Reinhardt is passionate about nonprofits. But, she’s building her career in finance. They’re completely different fields — but, Reinhardt sees important crossover. Most importantly, she sees a route to reaching her ultimate goal: giving back. *** Reinhardt grew up in Fremont, Neb., a small town just west...
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

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

18
Aug

Some Trading Maxims That Influenced My Investing

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

Years ago, I worked with bond and currency traders around the world (mostly in New York City, Chicago, and London), providing trading recommendations and market commentary every 20 minutes during market hours. The work environment was fast-paced, fun, and absolutely awesome in terms of being totally immersed in the markets. I learned a ton and made many friends that I still have today.

But, that frenetic approach to the markets is nothing like how I invest these days, professionally or personally (which both are basically the same). It’s also not how I recommend anybody invests. It’s simply too crazy and demands too much time, emotion, and expense. It’s a tough game to play, and particularly so for any duration. There aren’t many old traders.

(To be clear on definitions, I define trading as an inherently short-term activity. One may hold a position for only days, or as short a time period as minutes or even seconds. Investing meanwhile, is a long-term activity, measured in years, if not decades).

Nonetheless, there were many valuable principles I learned that influence how I think about the markets today. Here are three market maxims, and why I think they’re important:

  1.     “Let your winners run, and cut your losers short.”

This is probably one of the most important keys to successful trading or investing.

For starters, many investors simply hold on to their losing positions too long, letting them get much deeper in the process. They might be emotionally attached to the position. Or, they have too much pride. Or, they don’t want to be wrong. In some cases, substantial losses result, often sabotaging overall portfolio returns. There is no reason this should happen in a taxable account. One could simply harvest tax losses to offset future realized gains. If the positions are held in non-taxable accounts, there should still be a disciplined process in place that will help investors get out of losing positions. Stop losses, regular reviews, or checklists are three tools that could be used.

Losses are not the only problem. Many investors like to realize gains in winning positions too quickly. From an emotional standpoint, it’s often satisfying to take the gain. It’s a win! Money in the bank. But, most successful investors attain success from their long-held positions. The big winners have an outsized impact on their overall portfolio success.

        2.    “The market moves in the direction that causes the most pain.” Or, on a related note: “What is comfortable is rarely profitable.”

Consensus thinking is wrong so often on Wall Street, it is amazing people continue to invest in what they think is “safe” by investing in what is popular. In my experience, the market moves in the direction most don’t expect — the direction that causes the most pain.

This actually makes sense. When there is an imbalance of emotion in a particular investment and investors are positioned accordingly, expectations make the investment become vulnerable to a reversal.

For instance, if most investors think a particular technology company will continue to grow at a spectacular earnings growth rate (let’s say 50% for example, which would be a supremely high expectation since the average company has pulled in earnings growth closer to 6% over the last 90+ years), they may bid up the company’s stock price and valuation. So, what happens when the growth rate is actually 50%? Perhaps not much. It was already priced into the stock price. Now, what if the growth rate is only 40%? That is still spectacular growth, but it’s below the stock’s expectations and what valuations warrant, so it’s probably a poor result for those who own the stock. And, what if earnings growth falls toward the long-term average — like all companies ultimately do? Not good.

        3.    “The train has left the station.”

This saying is a favorite of mine. It may not be as popular as the maxims above, but it captures a key principle behind many successful investments. And, quite frankly, it’s fun to say.

As it relates to investing, this saying refers to a situation where a particular asset class hasn’t gone anywhere in a while (it’s at the station), but has finally started to move and is likely ready to embark on a major trip. Many relative, value-oriented managers, such as CLS Investments, like to buy assets that have underperformed recently and are now undervalued and priced for relatively superior returns moving forward. Once the market starts to reverse the prior underperformance and appears to potentially (hopefully) have a long run of good performance ahead, then “the train has left the station”.

A good example, particularly in recent quarters, is emerging markets. After lagging for many years, emerging market stocks have started to outperform handily. We hope the train left the station for emerging markets last year and the sector has a long journey still to go.

The trading experience in the early years of my career helped me learn many techniques of successful (and not so successful) trading and investing and helped inform and shape my decision-making process. The maxims above are three of the most impactful I’ve learned thus far. Stay tuned for more in future blogs!

2827-CLS-8/10/2017

 

16
Aug

Open Doors

Content provided by Robyn Murray, Freelance Writer

Bailey Neben was scanning the Babson College alumni directory when she realized she was just one of 13 Nebraskans to ever attend the Boston-based university. Who were these fellow Cornhuskers? What drove them to the East Coast? Did they ever go back home? She started wondering about this small circle and wanted to know more. She also wondered if anyone in the group might be able to connect her to opportunities in the real world. So, she decided to reach out. She sent a note to each name on the list, and — happily for CLS — one of those names was Rusty Vanneman.

“Bailey impressed me from the start,” Vanneman said. “She is bright, eager, and full of energy.” They met in person at the CLS office over her winter break. “At first, I was just contacting him to find out his story,” Neben said. “How did he get to Babson and when did he go back to Nebraska? Then it became: ‘What am I doing over the summer?’” As sophomore, Neben presents herself with confidence and poise, taking charge of a room and articulating her thoughts and ideas with self-possessed style. She is concentrating in accounting and finance at Babson, leaving both doors open while she figures out which career path suits her best. Today, she is wrapping up an internship at CLS where she split her time between sales and portfolio management. More doors left open: two of many she is likely to have in her future.

“I wanted to break out of my box”

Neben grew up in Waverly, Nebraska. It’s a small town of about 3,700 people just outside Lincoln. She attended the same school for 11 years and saw the same faces every day. “I was with the same 140 people in my class my entire life,” she said. She noticed the people who graduated ahead of her stuck within their own familiar circle, and she wanted something more. “I wanted to break out of my box,” she said, “and meet new, different people that weren’t from Nebraska.”

So, Neben decided to head to the East Coast. She wanted to be near a big city where there was always something to do and opportunities abound. She was drawn to Babson because of the college’s focus on academics. She’d always been good at math, so she knew she wanted to do something with numbers. In high school, she had taken an accounting course that she loved where she had to manage a fake company’s books. It was a two-month project that she finished in two weeks. “I did that for hours at home just because it was fun for me to do,” she said.

Going to Babson was tough at first. She had to make new friends, and for the first time in her life she couldn’t turn to her parents or older sister, who she has always looked up to, for help. “It was a big change for me,” she said. “But it gave me some independence.” The transition was helped by the amount of diversity at Babson. Neben knows the figures by heart: Babson is 30% international students; within domestic, it is 50% multiracial with 48 states represented. “It gave me a new perspective on all the other things that are out there,” she said.

Neben soon settled in. She joined a sorority and Babson’s theater group and became a career advancement ambassador, giving campus tours and meeting alumni. But, she was still thinking about the Nebraska alumni. Her meeting with Vanneman had gone well; he had offered her an internship back home, and she was excited to take it.

She began at CLS in May. Her internship is part sales and part portfolio management. On the sales side, she’s helped get proposals out to advisors and put together a list of self-directed plans. “Jobs that make [the sales team’s] lives easier,” she said. In portfolio management, she has helped Kostya Etus write a paper on Environmental, Social and Governance (ESG) investing and Josh Jenkins work on a CLS certification project. She’s hoping it will be complete by the end of the summer so she can see the end result of her work. “It’s been amazing,” she said. “I don’t think any of my friends have internships where you’re actually doing real things.”

Neben says she’s also learned about what it takes to work in an office — an environment she thought would be very different from the collaborative atmosphere at CLS. “I was thinking it would be more cutthroat,” she said. “But everybody’s friendly and very professional at the same time.” She said she’s grateful to the team for helping her every way they can — even making introductions to people outside the office that have already led to new opportunities. “It’s not just about them,” she said. “It’s about me, too, and I’m grateful for that.”

Vanneman says Neben has exceeded even his “lofty expectations.” “I always expect members of my team to give 100%, which Bailey was able to do from nearly day one,” he said. “She has been a very high producer, in addition to being fun to be around.”

Before Neben leaves CLS, she’ll spend a few days in the accounting department getting a feel for how things work there. She’s still not sure which way she’ll go. She enjoys accounting because it’s straightforward and focused on rules and processes, but she likes finance too because it’s the opposite: different every day and subject to market whims and global events. The portfolio management team is “definitely not doing the same thing every day,” she said, “which is really intriguing.”

Next summer, Neben hopes to secure an accountancy internship through Babson, so she can get a proper feel for that side of the financial world. In the meantime, she has a few words of advice for the next intern at CLS: “No question is a small question,” she said. “And take as much work as you can.” In other words: Open as many doors as possible.

2843-CLS-8/14/2017

03
Aug

Integrity Counts

Content provided by Robyn Murray, Freelance Writer

Andie Wilkinson was full of energy as a kid. She signed up for every sport she could — often at the encouragement of her parents who were looking for ways to channel her exuberance. She ran track; played soccer, softball, and basketball; she was a cheerleader and a gymnast. Basically: “I played everything,” she said.

Wilkinson was the captain of her soccer and track teams, and the experience of playing for a team shaped her thinking. “It helped me learn how to be responsible for other people,” she said, “and motivate them to do their best.” She was also influenced by the example set by her parents – to stand up for others and live life honestly. Now Wilkinson channels her energy into raising her kids and working at a company where integrity counts.

***

Wilkinson grew up in St. Louis, Missouri. She lived near a lake and a stretch of woods, which she spent hours exploring with her brother. She remembers her mom hustling them out the door after school, and they didn’t come home until dinner. “We’d just play,” she said. “We were always doing something outside.”

Her father worked as a general manager for an insurance company and was also an elder at her church. Her mom stayed at home, and together they taught their kids the importance of integrity and standing up for people. “I heard stories about my dad rallying around a kid at school who was getting beat up,” she said, “and my mom would always talk to us about bullying and encourage us to sit with the person who was eating alone at school.” Wilkinson says her parents set an example she strives to live up to in work and in life. “My parents are just good people,” she said. “There’s no room for anything other than being straightforward and honest. I could only hope to be half the person they are.”

After high school, Wilkinson got offers to play soccer and run track in college, but she was burned out on sports and looking for something new. She attended the University of Missouri where she earned an interdisciplinary degree in business, psychology, and sociology. She was interested in human nature and understanding what makes people tick. She had originally intended to study psychology and sociology, but her dad convinced her to add business to the mix.

When she graduated, Wilkinson got a job at a grocery store chain and worked her way up to a district supervisor position where she managed seven stores. She spent time hiring, overseeing the financials, training people, and fixing problems. She loved the job, but it required 70 hours a week, and by the time she got married and started having children, she decided to switch gears.

Wilkinson spent 10 years at home, raising the six children she and her husband have between them. When she got back to work, she took a job at First National Bank in billing resolution where she fought on behalf of clients when there were charge discrepancies. “It was my job to go to bat for them,” she said. That urge to stand up for people found a new outlet in 2005 when she got a call from a friend who said she’d be a perfect fit for a position at CLS Investments. The company was looking for an internal wholesaler to cover the Northeast territory, and Wilkinson was up for it.

The job was in sales, but Wilkinson says it’s not just about the numbers at CLS. “The company has a lot of integrity,” she said. “They’re really good about letting me sell what I’m comfortable with.” Wilkinson says she enjoys the financial industry because she learns something new every day, and she enjoys working with advisors who appreciate her straightforward style. “There’s no back and forth between what I want to say and what I should say,” she said. “I sell what I think is right, and I think that helps advisors understand they can get the truth from me.”

Outside of work, Wilkinson keeps busy at home — working on house projects, painting and fixing things, or working in the garden. Or, of course, taking care of her kids and shuttling them back and forth between their various sports and activities. They’re energetic, just like their mom, and life is busy — just the way she likes it.

2356-CLS-3/17/2017

14
Jul

Don’t Let Malware Make You “WannaCry”

Content contributed by NorthStar IT

On May 12, 2017, an unpresented wave of ransomware spread via the internet hitting organizations and individuals around the world. The ransomware known as “WannaCry” quickly became front page news.  The purpose of the ransomware, developed by cyber-criminals, was to extort money. The way it accomplished this was to infect unpatched Windows PCs and encrypt 176 different file types (picture files, documents, spread sheets, video files, database files, etc.) leaving the files inaccessible. Then, to unencrypt the files, a ransom had to be paid using the cryptocurrency known as Bitcoin. Average ransom amounts started at $300 and increased incrementally over time until, at seven days, if unpaid, all encrypted files were permanently deleted from the user’s system and lost forever.

The was delivered through a hyperlink that could be embedded in emails, web page advertisements, or in a Dropbox links. If a user clicked on any of these links, the PC secretly accessed a website where the virus resided. If the PC did not have the appropriate PC patches or anti-virus software installed, the PC downloaded malicious code which then started the file encryption process and displayed the following message:

Hundreds of thousands of PCs around the world were impacted by this virus. Hospitals, banks, and telecommunications companies were some of the hardest hit industries.

(CLS, Orion, and The Gemini Companies) avoided this outbreak. But how?

At NorthStar, before any computer traffic enters the network, it has to pass through a series of hardware devices and software which closely inspects all bits and bytes for malicious content. Based on very complex and sophisticated rules, logic, and algorithms, some traffic is blocked outright, some is quarantined for review, and the rest is allowed onto the network. However, even with these tools in place, it is possible for new variants of malware to come up and make it past these tools. In the event something does slip through our perimeter defenses, NorthStar also has tools that reside on servers, desktop PCs, and laptops to contain and mitigate any compromise. These tools add an additional layer of protection to detect, prevent, quarantine, and clean malicious content from end-point devices (PCs, Laptops, SmartPhones, etc.).

For those who are interested in technical details, below is a list of many of NorthStar’s security tools and what they do:

  • Email Security Gateway: this product scans all inbound emails and searches them for malicious attachments and embedded links that could take users to malicious sites. If found, the software will quarantine the emails for review or outright delete them if known to be malicious.
  • Intrusion Detection\Intrusion Prevention Systems (IDS\IPS): These systems inspect network traffic at a very low level (bits and bytes). Upon detection of suspicious content, they will automatically block it before it can enter NorthStar’s systems. In addition, these systems filter out traffic from specific geographical locations known to be the source of malware (e.g. Russia, Iran, etc.).
  • Advanced Network Anti-Malware: These systems scan for and detect attacks and malicious network packets as well as command and control communications. “Command and control communications” is when malware communicates back to a home base for additional attack code or content. WannaCry is an example of malware that uses command and control communications.
  • Web Filtering: Web filtering programs block access to sites that have known malicious content. NorthStar’s web filtering software is actively updated with lists of malicious sites, so as soon as any site is registered or detected to have the ability to spread malicious content, it is automatically updated and will block users from accessing those sites.
  • Advanced EndPoint Anti-Malware: This is advanced anti-malware tools installed on the (PC installed). It works similarly to and in conjunction with NorthStar’s Advanced Network Anti-Malware, but on the PC level as opposed to the network level.
  • Anti-Virus Software: This is a traditional anti-virus program which actively scans and monitors traffic to and from each PC looking for malicious software. In addition, the software utilizes traditional virus scans of a PC’s local hard drive to detect anything that might be on the hard drive, but not active.
  • Log Collection: This is a system which collects and analyzes PC, server, and network logs looking for questionable activity WITHIN the internal networks searching for activity that could get in via an internal source like a PC USB port, a DVD, or personal computer plugged into a company network port (which is strictly forbidden in our Employee Policy Manual).
  • NorthStar also has robust data recovery tools that can be used to quickly recover systems and data if such an attack like this was successful and original files needed to be restored.

In addition to having the above tools in place, NorthStar ITOC took the following additional steps and precautions when the WannaCry outbreak was discovered:

  • NorthStar double checked that the appropriate Microsoft patches were installed which stop this virus.
  • NorthStar enabled Snort Rule 42340 – A new rule for our IDS\IPS systems which was developed to stop WannaCry once it was detected and started spreading.
  • NorthStar confirmed firewalls were blocking malicious traffic on the specific ports\channels the virus communicated over.
  • NorthStar confirmed TOR network blocking – TOR is an external anonymous network that is notorious for spreading malicious content, so we doubled checked our settings to make sure we were blocking this traffic.
  • NorthStar confirmed all Advanced Malware Protection systems and software had been updated to detect this ransomware signature.
  • NorthStar confirmed the email security gateway was scanning for this specific

As you can see, NorthStar takes cybersecurity very seriously. From the technical tools in place to the audited and certified ISO 27001 processes and controls, NorthStar is committed to investing the necessary time and money for industry leading technology, processes, and people.

2709-CLS-7/12/2017