At Wendl Financial, our value investment philosophy conforms to the principles outlined by the founder of value investing, Benjamin Graham.  If an investment choice does not meet the stringent value criterion, it will not be considered for purchase in a client's managed account.  Only individual securities trading at a high dividend yield or low price relative to net current asset value will be included in a portfolio.  Exchange traded funds (ETFs) biased towards the value investment philosophy will also be considered for purchase for diversification purposes.  Once the appropriate weighting in stocks is determined for a client’s portfolio, stocks included will conform to the stringent value stock selection approach. 

What differentiates Wendl Financial from other investment advisors that claim to follow a value investment approach is our rigorous interpretation of the philosophy.  Many advisory firms managing assets use a relative valuation criterion.  This approach to value investing results in a client’s portfolio remaining fully invested in stocks when market valuations approach extreme levels.  Strong academic evidence supports the value investment approach to stock selection over the long term, but significant drawdowns in a portfolio will occur over the short term following a relative value investment philosophy.  All stocks including ones classified as inexpensive relative to earnings or assets will go down in a bear market.  Wendl Financial does not follow a relative value investment philosophy.  We will not relax our rigorous criterion even if that means underweighting in stocks when few opportunities are available. 

The value investment philosophy is an underlying thread that runs through all of the portfolios managed for clients at Wendl Financial.  Although past performance is no guarantee of future results and loss of principal is always present, I'm confident the strict value investment philosophy should generate solid performance over the long term.

A portfolio recommended at Wendl Financial always conforms to an individual's age and unique tolerance for risk.  Assessing the individuals risk tolerance level is a critical component to managing a client’s portfolio.  Individuals who prefer an investment portfolio with lower volatility will have a higher weighting in more conservative asset classes such as bonds and cash.  Individuals who are willing to accept a higher level of volatility in order to generate a higher expected return in their investment account will be more heavily weighted towards stocks.  Optimizing both the client’s sensitivity to short term fluctuations in their portfolio and avoiding the long term risk of assets not keeping up with the rate of inflation is critical to our investment approach.

To reduce the volatility of an investment portfolio, allocating capital across a number of asset classes is critical.  Diversification in less volatile asset classes for a client’s portfolio is achieved at Wendl Financial through investment in low-cost exchange traded funds.   Historically, stocks generate the highest long-term return for a portfolio along with the highest volatility.  The general theme in stock investing by the public is to diversify across a broad portfolio of stocks indirectly through a mutual fund.  This form of investment vehicle is not only expensive using actively managed mutual funds, but delivered terrible results over the last decade.  Reducing systematic risk by including multiple stocks in a portfolio is important, but overdiverisfication should be avoided.   At Wendl Financial, we advise a combination of both individual stock selection meeting strict value criterion and low-cost exchange traded funds to deliver high expected returns.  This alternative strategy provides the benefits of risk management through volatility reduction without over-diversification.  Implementing this more selective approach for the stock portion of a portfolio should reduce the risk of near zero performance over the last decade by a typical stock mutual fund.