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Portfolio > Portfolio Construction

Her Own Way

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Larissa Poindexter is the kind of daughter that every elderly parent wishes they had. As if visiting often and keeping an eagle eye on her mother’s care weren’t enough, Poindexter actually built a house right behind her own so that her mother and an elderly aunt could live nearby during their twilight years. Every day after her morning swim, Poindexter pops over to “the neighbors’ house” to make breakfast for three (to come downstairs, her mother and aunt take the specially installed lift), and every night after work, she stops over again to say hello. It’s truly the stuff that many older parents’ dreams are made of.

While Poindexter is nothing if not nurturing–she recently started looking after another unrelated elderly neighbor, too–she’s not the gingham-and-cookies softie you might be expecting. Ensconced in her high-rise office in downtown Houston, Poindexter, 44, means business when she’s at work. She says she left her old firm, Paine Webber, because it didn’t give her the support and flexibility she needed, and when she joined a new firm, Raymond James Financial Services, she did so with specific conditions about the resources she’d need and the independence she’d require. Even when dealing with clients, Poindexter is not the type to suffer fools gladly, and if she thinks you’re wrong, she’ll tell you. Just ask Kirk Weinert.

In the late 1990s, Weinert, a retired attorney and long-time client of Poindexter’s, had an enormous portion of his portfolio invested in a single company that, thus far, had only gone up, up, up. Poindexter wanted him to diversify it, and she said so–bluntly. “I said, ‘Well, your future is on the line. Do you want to be greedy, or do you want to diversify your risk?’”

Put that way, Weinert could hardly say no. So Poindexter sold much of the holding, and thus prevented him from losing significant sums when the company’s fortunes went poof. “It wasn’t what I wanted to hear at the time, because everybody was enjoying the big prosperity, but boy, was she right–exactly right,” says Weinert, noting that his whole portfolio was largely unscathed by the dot-com crash and subsequent bear market. “She’s a straight talker–she doesn’t beat around the bush–and I feel comfortable knowing that she will tell me what she thinks, and why,” he says.

Portfolio Builder

Poindexter’s up-front style is part of the reason Weinert has followed her as she’s changed firms twice, first from Smith Barney to Paine Webber in 1999, and from Paine Webber to Raymond James earlier this year. He also values her independent streak. “I have never felt like I’m being asked to make a decision based on some recommendation that may have come from her firm: it comes from her, and if she doesn’t believe in it, she won’t recommend it.” Indeed, it was the desire for greater independence that pushed Poindexter to set up her own firm at Raymond James, where she would have greater control over her clients’ assets. “I think the final straw was when TCW [Trust Company of the West, a third-party money manager that Paine Webber made available to its brokers] bought Enron–and even I knew not to buy Enron at that time–and then I found out that Ken Lay was on the board of directors of TCW,” she says. “I said, ‘What’s the deal here? Is this based on golf and whisky and cigars, or is it based on a fundamentally good analysis of Enron?’ And since I’m on the hook for my clients’ money, and I have the skills to manage their money, I figured I might as well do it myself.”

That independent spirit served all of Poindexter’s clients well in the bear market of the past few years. Her clients’ investment returns had never led the pack during the market bubble of the 1990s, but when the market climate clouded over, her conservative investing style shined through. In 2001, clients invested in Poindexter’s “equity all-cap core” portfolio lost only 7.4% (net of fees), compared with an 11.5% drop in the Russell 3000. In 2002, the gap was even larger: Clients invested in the “equity all-cap core” portfolio lost an average of 10.1% (net of fees) while the Russell 3000 plummeted 21.5%. At heart a conservative investor, Poindexter is even prouder of the performance of her balanced portfolios: In 2001 and 2002, her taxable balanced portfolio fell -1.1% and -2.2% respectively, while her benchmark (a 60%/40% combination of the Russell 3000 Index and the Lehman Brothers Intermediate Government/Corporate Index) declined -3.2% and -9.6%, net of fees (for more on how Poindexter builds her model portfolios, see The Stock Picker sidebar on page 72). By the time she left Paine Webber, Poindexter was the number-two revenue producer for the Houston Paine Webber office, and she ranked among the top 400 of all of the firm’s approximately 8,000 brokers.

What’s her secret? “You have to be invested in the good stuff, and you have to stick to your investment discipline like Velcro,” says Poindexter. “Buy good companies, and stick with them over the long haul. It’s kind of a plain-vanilla approach, but when you look at how I did in this bad market, it’s pretty impressive.”

A Stock Picker, and Proud of It

Unlike many advisors, Poindexter invests her clients’ money solely in individual stocks, rather than mutual funds. She looks for companies that are rated A- or better by Standard & Poor’s, have little or no debt, and pay regular dividends, preferably dividends that represent only a small portion of net profits. “I like a low payout of net profits in the dividend, because it gives the company room to maneuver when they have a bad year,” she says. “If a company is paying out, say, 17% of their earnings [through dividends] and the business goes through a down cycle, they can still pay their shareholders more money by increasing the percentage to, say, 28%.”

And dividends function as a bellwether for the company’s health, adds Poindexter. “When a company has a history of paying a dividend and then suddenly can’t do it anymore, you should always sit up and take notice of that, no matter what Wall Street says,” she advises. “That’s a tell-tale sign that something’s not right.” Even irregularity in the dividend amounts are worth noting. For instance, Poindexter owned Duke Energy for many years, and until several years ago, the dividend increased every year. When the dividend plateaued for five straight years, she sold the stock at $45 per share. The stock’s shares eventually plummeted to $12.

Yet Poindexter is also a patient investor who’s willing to give a good company the benefit of the doubt. “I won’t sell a company just because they’re having a bad quarter, or a bad year–or a bad two years, even,” she says. “If they’re showing a commitment to grow their revenues and honor their commitment to paying dividends to shareholders, I’ll give them time to work through their problems.” It’s important to remember that good products often take time to develop, she adds. For instance, a line of specialized milk products introduced by Nestl? (a Poindexter favorite) in the 1990s took three decades to develop. “They started working on it in 1964, and it hit the shelves in 1994,” she says. That’s patience.

Ethics, English, and Education

While she’s tolerant of some short-term corporate problems, the one thing Poindexter has zero patience for is a company with shady ethics. Poindexter never owned Tyco, firstly because she couldn’t make sense of its balance sheet, and secondly because its management increased profits by treating their employees like dirt. “They bought a coat hanger factory in El Paso, and the way they made the business more profitable was by cutting those people’s salaries from something like $9 to $7. That’s just not right,” she says. “I want to own companies where the management takes care of the shareholders and takes care of their employees.” She cites Johnson & Johnson as an example of a company with strong ethics, as evidenced by its honest and speedy response to the Tylenol cyanide scare years ago. “They just took it off the shelves completely, and rushed to do it; they didn’t lie, and sweep stuff under the carpet,” she says. “I like that.”

Interestingly, Poindexter says that her formal education as an English major comes in handy when she’s researching companies, especially when she’s perusing annual reports. “If you read them carefully, sometimes you have to put it down and just laugh about what they’re not saying,” she says. “If you read between the lines, you’d be surprised what you can learn about these companies.”

Poindexter works hard to make sure that her clients understand the companies which they own. She sends out periodic letters to clients with information about the stocks in their portfolios, and is happy to talk to them about new stocks she’s purchased. Her goal is to make clients so comfortable with the companies they own that they’ll be willing to have her invest more money in those companies when their stock price is down and other investors are plagued by doubt. “Say you saw a $200 outfit you liked that was marked down to $50. Wouldn’t you buy it?” she asks. “Same thing goes for stocks. But the majority of people don’t get it. They think that because J&J is trading at 42 bucks a share, suddenly there’s something wrong with it.”

On Her Own–Sort Of

When Poindexter decided to leave Paine Webber, she wasn’t quite ready to set up shop entirely on her own as an independent RIA. Although she has managed money for a fee since 1994, she didn’t feel that she had a long enough track record or enough money under management to make a go of it alone. “If I’d had $500 million under management, I might have done it, but I manage $60 million,” she says. “I’m just not there yet.”

But there were several things that appealed to her about affiliating with independent broker/dealer Raymond James. First, she says, since the firm was founded in the 1960s, “it kind of grew up with the women’s movement, so there are a lot of women here in executive positions,” she says, noting that in her first job at a discount brokerage years ago, she was one of only two women in the entire office. “I wanted a firm that was supportive of women in leadership roles,” she says. Second, the firm was willing to provide her with research support, including her own Bloomberg terminal. And finally, Poindexter appreciated the firm’s willingness to let her structure her business as she wished and hire additional staff. “My goal is to spend 80% of my time reading and thinking about investment decisions, 10% with clients, and 10% running my business,” she says. To that end, she has two assistants, and has hired an additional staff member to oversee her firm’s marketing efforts. “I’m really being supported to hire the people I need to hire to grow my business,” she says.

Knowing Your Limitations

While many firms hope to be all things to all people–the much-vaunted “one-stop shop”–Poindexter has no such aspirations. She wants her firm to manage money, and manage it well, period. Interestingly, she says she doesn’t even foresee referring clients to other professionals within Raymond James. “If someone [from Raymond James] does financial planning for them and it’s not a pleasant experience, that bad experience will have a negative effect on the client’s relationship with me because that person is seen as connected with me,” she says. To avoid that risk, Poindexter would prefer to refer clients to professionals outside the firm.

While some advisors try to tell clients that investing is rocket science, Poindexter’s investment strategies are refreshingly easy to explain. Own good companies, and own them for a long time. Know when to hold ‘em, and know when to fold ‘em. Expect a dividend payment, and sit up and take notice if you suddenly stop getting one. Expect your advisor to tell you what’s what, even if it isn’t what you want to hear. Armed with this advice, Poindexter plans to help her clients have plenty of money to make their golden-years dreams come true–even if they don’t have a daughter to bring them breakfast.


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