Consistent with our research on the economy and markets, we believe that different market conditions call for different investment tools. Over the long term, it is our goal to find the right vehicle in the best companies in the best sectors. Since our goal is to build long term value, we look for investment vehicles whose current price is less than what we believe reflects the underlying value. In our tool bag we include, stocks (equity), bonds, options and mutual funds in select circumstances.
Stocks: We divide the equity portion of our investments into two main categories. Our core equity position focuses on secular growth companies. When we consider their values attractive, we will augment the core secular position with cyclical companies. Currently, we are focused on two basic areas of secular growth: technology-related and emerging markets-related. Technology includes the information technology, biotech, and environmental industries. Emerging markets include the commodity, power generation, and innovative financial and other services industries. It is particularly exciting to see companies in emerging countries open new markets via the creative application of new technologies.
Bonds: From 1982, when Paul Volcker was chairman of the Federal Reserve, interest rates have trended down until 2009, when they reached zero percent. Since bond prices generally rise as interest rates fall, investors have mostly enjoyed positive returns on bonds over the past 30 years. Because it’s difficult for bond yields to go below zero, we believe this trend will not likely continue. One commentator recently stated that bonds currently offer “return free risk”. As a result, and in order to maintain a positive cash flow while minimizing capital losses, we focus our fixed income strategy in cash, inflation – protected bonds and other fixed income vehicles that track inflation.
Options: For appropriate accounts, Vios primarily sells put and call options to enter or exit a stock while generating cash in the process. Subject to the firm’s active risk management program, option sales can produce additional returns.
Mutual Funds: Funds are used primarily in areas where the underlying vehicle is difficult or impractical to access. For example, some emerging markets place significant restrictions on foreign investors, making access to those markets most efficient via a fund structure.