We think the key to investment success is strict avoidance of significant losses
The core philosophy of Barton TVC revolves around maximizing the investor’s odds of success by avoiding painful losses. We are not “benchmark-centric” investors focused on relative returns. Instead, we employ an absolute return framework across a variety of investment assets which provides diversity and predictability.
We pride ourselves on independent (often contrarian) thinking, and we avoid reliance on outside research which is often fraught with bias that negatively impacts returns.
We believe our long-term results are driven by a disciplined adherence to a time-tested investment thesis.
We think that valuation is perhaps the most important factor in determining long-term investment success. While many investors rely on simplistic measures like price-to-earnings or price-to-book value ratios, our model is based on a thoughtful price-to-value framework which focuses on “through-cycle” ownership.
Value Trap Avoidance
Businesses burdened with too much debt or have anemic growth tend to be poor long-term investments. Our diligence process focuses on evaluating the trends propelling or injuring businesses. We are extremely focused on balance sheet leverage and use of cash. We seek to avoid “value traps” by prioritizing sustainable earnings growth along with financial strength.
Differentiating earnings quality is an art form in the due diligence process. Many investors over or under estimate “earnings power” because the bottom line is not clearly understood. We perform an in-depth evaluation of accounting and management integrity by critically examining the financial statements and regulatory filings for information that others may overlook.
At Barton TVC, we seek the five pillars of true portfolio diversification: asset class, market, sector, currency and most importantly, strategy. A responsible level of diversification allows good investments to have a meaningful contribution while limiting the impact of unforeseen mistakes. The average number of positions in each Barton TVC portfolio ranges between 30 and 40, with initial position sizes of 0.5% to 1.0% in absolute dollar weight.
The first pillar is for investors to diversify is by asset class (e.g. equities, alternatives, fixed income, commodities). Different asset classes have varying degrees of correlation across market cycles which allows investors to offset losses in one asset class with gains in another.
Diversifying geographically can help investors spread their investment risk globally, thus avoiding undue geopolitical/market forces exposure in a single country or region. Our target is 85% North American investment by dollar weight and the balance in established economies in Europe and Asia Pacific countries.
We have a strong focus in key growth sectors including technology, healthcare, life sciences and energy but are heavily diversified across industrials and stable consumer segments which operate in uniquely distinct business environments with uncorrelated risk factors.
Currency risk is also a factor that can impact overall performance returns. For example, a US-based investor who invests in multi-national corporations may yield lower returns if a weak USD is converted from in-country currency to USD. Barton TVC hedges against these currency fluctuations as part of its geo/sector investment selection process.
Lastly, an investor should also consider diversifying across different types of strategies within the same asset class. One example, thematic equity investing, focuses on long-term trends like sustainability or demographic changes across several sectors in a common theme. This provides investors a unique edge over more conventional sector-driven investing like ETF's that rise and fall sharply based on sector conditions as a whole.
"It's not what you make, it's what you keep". After-tax return rates are the gold standard by which we measure our performance. Typical fund management fees and overhead costs pale in comparison to governmental tax impact on returns.
We use a full array of tax-management techniques including low turnover, deferral of gain-recognition until long-term when possible, and pro-active tax-loss harvesting throughout the year.