How One Portfolio Manager Used Brexit to His Advantage

“I wait for these pockets of volatility to put more money to work,” he said. “For us at Intrepid Capital to succeed, we need volatility to find pricing dislocations, whether that’s in the stock market or the bond market. Periods like this are helpful to us. And you start to see a little bit of outperformance in our funds, which we’ve had year to date. Our funds, depending on which one, are up probably 5 to 13% YTD.”

Another of Travis’ investment philosophies that he admits is patience.

“I know if I’m patient and wait till it gets to what I think it’s worth … I’ll be rewarded without taking any unnecessary risks,” he told ThinkAdvisor. “And in the bond market, by not being willing to lend more than five years, we can model out how we’re going to get our money back at the end of the term.”

Travis says he’s driven by equity valuation.

“Can I buy a high quality business – like Cubic and their subway systems, or Royal Mail and their mail, or [Patterson-UTI Energy Inc.] with their high quality electric oil rigs? And I know what the free cash flows worth using a conservative estimate or the value of the rigs,” Travis said.

On the fixed income side, Travis is driven by the question, “How am I going to get repaid?”

“We’re taking chip shots,” he said of Intrepid’s investing philosophy. “We run fairly concentrated portfolios … 30 to 50 equity names depending on the fund you’re looking at, but it’s typically a low-risk type of business. And/or the bonds have some type of collateral if something goes bump in the night.”

Travis also believes that asset managers can’t look like the index going forward.

“Indexing is very frequently used when there’s low volatility in an upward bias market,” he said. “[Investors] flee when it turns negative and/or volatility picks up. We’ve had a couple bouts of [volatility] this year that have been relatively brief – six weeks in January/February and again here in the last week.”

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