In BSW Blog, Economic Outlook, Portfolio Commentary

Earlier this week, I celebrated my 10-year anniversary here at BSW with my esteemed colleagues.  My first day at the firm was April 15th, 2002, a date I have celebrated each year and a tradition I plan to continue well into the future.  The 10-year mark prompted a deeper reflection on BSW’s history, how far we (both BSW staff and our outstanding clients) have come, and most importantly, our direction for the future. In April 2002, BSW managed roughly $150 million for about 100 families.  Ten-years on, BSW now manages $700 million for about 200 families – growth driven by both new engagements and investment returns in our clients’ portfolios over time.  For example, from January 1, 2002 to March 31, 2012, BSW’s Growth Portfolios have nearly doubled, returning a cumulative 86.9%.  These figures underscore the simple, yet powerful tenants that our clients demonstrate (thank you!) and which BSW continues to espouse: invest for the long term, live within ones means, and exercise discipline.

I can’t emphasize enough, however, that BSW has never, and will never, focus on “growth.”  Indeed, one of our primary objectives is to remain “small” – to retain and deepen the close relationships we enjoy with our clients, to be more responsive and accessible, to be nimble, and to maintain the fun, entrepreneurial culture that both clients and staff enjoy.  So instead of focusing on growing, we choose to focus on improving – getting better at what we do, how we do it, and enhancing the value we bring to our clients.  To that end, over this 10 year period, we have dramatically deepened both our advisory and investment capabilities and expertise, broadened our operations team and developed their specialties, and made consistent investments of time, energy, and capital in systems and technology (vaults, blogs, etc.) that (hopefully) improve our service to clients. Let me be clear: BSW does not aspire to be big.  We aspire to be great.  To that end, I welcome and encourage your candid feedback, suggestions, and input — please challenge us to meet and exceed your expectations! Looking back on 10 years, it has truly been my privilege to work with, learn from, and befriend many of BSW’s clients, and I look forward to celebrating further milestones with you in the years to come.

1Q12 Portfolio Update:

Despite, strong first quarter returns, we remain (rationally) optimistic and bullish on stocks in general, and US stocks in particular.  Our rationale is three-fold:

1) Investor sentiment is still relatively bearish as evidenced by fund flows, which tends to be good for stocks.  Despite doggedly low yields, last week marked the 37th consecutive week that bond funds attracted more money than stock funds – while cash on the sidelines also remains at near record highs.

2) US corporate earnings continue to be strong.  With more than one-third of companies having reported 1Q12 earnings thus far, more than 80% have beaten earnings estimates and more than 60% have exceeded their 4Q11 revenues.  Although the rate of these increases has slowed, both earnings and revenue figures continue to move in a positive direction.  As such, valuations look reasonable to cheap.

3) Finally, the employment picture is improving – albeit slowly – which has a strong influence on consumer confidence.  Rising consumer confidence tends to benefit stocks, both in terms of corporate earnings and the price investors are willing to pay for those earnings.  If we can avoid a repeat of last summer’s European crisis, the markets could continue to post good, though lumpy, returns.

Summary: We hope this Portfolio Commentary provides you with better insight into the components of your growth equity portfolios and our 2012 economic and investment outlook.  If you would like to discuss these positions or your portfolio in greater detail, please don’t hesitate to contact BSW.  As always, we are happy to help.

-David Wolf, Managing Principal & CIO

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