We screen a large universe of companies according to a consistent set of growth and quality measures. These principles have served us well as long-term investors.
Our investments are comprised of very high-quality growth companies. Many of them have great exposure to fast-growing overseas markets, but, we believe, shield us from direct political, currency, and foreign accounting risks. Our prudent analysis relies on three core investing principles.
Focus on the long term. We do not allow stock market gyrations to divert us from our strategy that has worked well for more than 35 years. We, therefore, resist short-term performance pressure, and ignore fads and Wall Street hysteria, much of which is generated by the short-term perspectives of traders and the financial media.
Avoid excessive trading or turnover. We stick with companies as long as their business delivers the results we expect. This has the additional benefit of being very tax efficient. Our long-term strategy allows clients to defer taxes for a number of years and pay capital gains tax rates instead of higher ordinary income tax rates. The tax headwinds faced by rapid traders are very difficult to overcome. The low turnover rate within Henry Armstrong portfolios also reduces transaction costs.
Prepare at all times for bad weather. We are always alert to the threat of resurgent inflation. Thus, we seek to avoid companies that would be harmed by economic cycles because they have no pricing flexibility, require large amounts of capital to grow, or are capital-intensive.
Fixed Income Principles
- Safety and stability are our primary concerns. Fixed income provides a steady income stream and balances the portfolio.
- We use Treasury securities of intermediate to short-term maturity, or very high-grade municipal bonds, when available.
- We structure the maturities in a ladder over a period of years, in order to:
- Take advantage of interest rate shifts,
- Seek to reduce price volatility,
- Avoid tying up funds for a long period of time.
- We concentrate risk in equity, where generally investors can get well paid for it over a long time horizon.
Disclosure: The above principles are general precepts, and individual client experiences may vary.