The Cymor Strategic Growth Fund is a long hedge fund that invests primarily in value stocks. It is managed with the belief that the greatest absolute (real) returns are achieved by recognizing and buying stocks that are undervalued, that have limited downside, and have significant upside.
We believe that good absolute returns can be achieved regardless of the performance of any particular market. We pursue this philosophy with a bottom-up value investment strategy whereby we hold only those securities that are significantly undervalued.
We measure the “up” side and the “down” side of any stock we examine. The down”up” side must dwarf the “down” side or we will not hold that stock. The markets are notorious for ignoring and undervaluing stocks regardless of their intrinsic value. For this reason, although in due course the market will usually recognize value, a portfolio of such stocks are essential. Holding too limited a portfolio of stocks is a dangerous thing.
We also realize that “the trend is your friend”. Trend affects our decisions, but following trends also increases the chances of being caught when the trend fades. For this reason. If a stock has increased in value for a long period, we become wary. Stocks do not trade on their value. They trade on people’s perspective of those stocks.
Recognizing value is an important task. Buying a stock at a price that we deem expensive increases the possible downside whatever the intrinsic value of that stock. Recognizing downside is at least as important as recognizing upside.
Safety in Investing
It is difficult to choose a ‘supposed’ blue chip or valued stock. Essentially the value has already been recognized and the value of the stock reflects that.
Take Apple as an example. It seemingly never ceases to amaze. It is run by an extremely talented group of people, led by an amazing person. Apple continues to deliver.
Would we buy Apple? No !
To us, Apple is a dangerous stock. See what happen when a rumour of the CEO being ill circulates. The stock plummets. Will the stock rise more? It most certainly will if the next release is a blockbuster device.
But what if Nokia comes out with something better and cheaper? Or what if RIM jumps ahead in technology. We leave stocks like Apple to those funds that have large resources of analysts, and the ability to tap into current social media, and technical changes rumours, and so on.
Our world is easier and much safer. The companies are much smaller, management has the time and desire to convince us of their unrecognized value, and the product is much easier to understand.
What about RIM? It was a darling and rose to well over $100 /share. Now it trades at 50% of that and fluctuates with the latest rumour, or the latest sales figures. Do you really believe that investing in RIM is safe?
If you want to own Apple and Rim, or Microsoft, or Nokia, buy a mutual fund. We fell much safer where we know the companies, we know how to recognize value, and our efforts determine success, not the general market, and not some distant unknown factor.
Gold – Is There Value at these Levels?
Some months ago, we published a comparison of the value of gold and Return on Investment. The precious metal has since increased continually and dramatically. Recently, the price again broke the $1,400 per ounce and looks like it has lots more momentum coming on the upside.
There’s every reason to suspect this is only the beginning. Even after this tremendous run-up, we expect gold to head higher… much higher.
That’s because gold’s “true” high is actually closer to $2,000 or more. If you listen to Rob MeEwan, it’s closer to $5,000. If you listen to various brokerage company analysts, it’s $1,500 or $2,500, or $4,000. Pick a figure that above today’s figure and someone will have projected that figure as gold’s future high.
When we talk about the price of gold, we must take into account the decreasing value of paper currency, especially the US $ over the years. So comparing yesterday’s gold price to today’s gold price is a distorting image.
Adjusted for inflation, a $35 ounce of gold in 1971 would be worth $175 today.
Adjusted for inflation, the 1975 gold price is $697 in today’s dollars.
Adjusted for inflation, the 1980 gold price, the peak year at $850, is $2,275.
But don’t be confused. The price of gold is a speculator’s dream. The value of the Cymor Strategic Growth Fund is in recognizing value in gold and other stocks.
