Sub-advisor to the Masters’ Select Smaller Companies Fund
The opinions and conclusions expressed herein are those of Litman/Gregory Fund Advisors, LLC and Jeffrey Bronchick at the time the material is written and may not be reflective of current conditions.
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Jeff Bronchick and Tom Kerr are the portfolio managers responsible for the segment of the Fund’s assets managed by Reed, Conner & Birdwell, LLC (“RCB”). Bronchick and Kerr are partners in RCB and co-managers of the firm’s small-cap value investment strategy. Bronchick joined RCB in 1989 as a research analyst and currently is Chief Investment Officer, portfolio manager and equity analyst, and co-portfolio manager for the CNI Charter RCB Small Cap Value Fund. Prior to joining RCB Bronchick did equity research and trading at Neuberger Berman, Bankers Trust and First Boston. Kerr has been with RCB since 1994 and currently is a portfolio manager and equity analyst and co-portfolio manager for the CNI Charter RCB Small Cap Value Fund. Prior to joining the firm Kerr was an analyst with The Fuji Bank, Ltd, D.R. Morgan and GE Capital. Bronchick and Kerr are supported by a team of analysts.
I am one of those boring guys who always wanted to do something on Wall Street. My father was a stock broker and investment banker, so I had a nose in things from an early age. I wrote a stock market column for the Philadelphia Business Journal while I was in college and unsuccessfully attempted to put myself through school via personal investing. I find the endless breadth of investment-related material fascinating and a constant challenge. And I believe if you are intellectually honest and not afraid to be visibly and sometimes painfully judged by your peers, investing is not work, its fun.
My “philosophy” grew out of my three years at Neuberger Berman in the 1980’s, where frankly, I contributed little of consequence though I was able to watch, annoy and pick the brains of a group of brilliant, idiosyncratic, old-time characters who built fabulous wealth via the fiendishly simple art of identifying and buying cheap stocks. I earned my CFA there, read every piece of historical investment literature I could get my hands on, and was inspired to work my tail off so that one day, I too would be a stubborn, old-time character who built wealth by investing in cheap stocks.
Within the constraint of “briefly,” the key elements are:
- Internally generated thinking which blends intensive spreadsheet work with equally intensive qualitative analysis of management and industry factors.
- A balance between three foundations: valuation – generally driven via a discounted cash flow approach; business analysis – generally driven by return on invested capital trends; and management/catalyst issues.
- Buy good businesses at reasonable prices and reasonable businesses at very good prices.
- Less is more: fewer and hopefully better ideas.
- Longer term thinking: ignore the pennies and look for dollars.
The key contributors are working hard; having a small group of teammates who are equally hard-working and enjoy working together at least four days a week; humility so as not to get carried away with short-term success; and the discipline, not to get shaken out of our beliefs when things are not in working in our favor. Clients who also think long term are crucial—there are very few endeavors in life whose quality is improved by bystanders breathing down your neck.
Every member of our research team is a contributor to our efforts for Master’s Select. But as we often note, ten people cannot consistently make quality investing decisions and that is particularly the case in value investing, where there often appears to be “something” wrong with a target company. Tom Kerr and I have worked together as a small-cap team since 1994 and we make the final call as to what goes in the portfolio.
Public filings and company websites provide the basic fundamental data and conference calls and management contact provide the party line. We have developed many contacts in a variety of different industries that can provide additional pieces of the puzzle and we use consultants from time to time to get up to speed on new industries or to assist in the analysis of specific issues.
Our traditional portfolios contain 25 to 35 stocks so we have always leaned toward much more concentration than many of our peers. Additionally, one of our three value strategies is an All-Cap portfolio, which picks from the best of our large- and small-cap ideas, so we are very much in tune with the idea of less is more.
Neither the information contained herein or the opinions expressed shall be construed as an offer to sell or a solicitation to buy any securities mentioned herein. This material should not be interpreted as an offer of any other funds mentioned. Click here to view the most recent portfolio holdings of the fund.
The fund may invest in foreign securities, which exposes investors to economic, political and market risks and fluctuations in foreign currencies. The fund will invest in the securities of small companies, which subjects investors to additional risks, including security price volatility and less liquidity than investing in larger companies.
To obtain a current prospectus for the Masters’ Select Funds at no charge, please click here or call 1-800-960-0188. The prospectus contains more complete information with respect to the risks, costs and expenses of investing in the Funds. Please read it carefully before investing.
 For industry terms and definitions, click here.
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