In a market that can be difficult to anticipate, there’s a simple pleasure in seeing spring arrive right on time. And if the April showers outside our office are any indication, it would seem that May is planning to make a colorful entrance, indeed.
Let me once again begin with what matters most – your family’s health. In these humbling and unprecedented times, one cannot help but be reminded of life’s true priorities. As vaccines become widely available and a true “reopening” is around the corner, it is my sincere hope that this letter finds you and your loved ones in good stead. (more…)
Let me begin with what matters most – your family’s health. In these humbling times – times in which young couples are married on the front lawn, and new fathers are locked out of the delivery room – one cannot help but be reminded of life’s true priorities. As the pandemic continues to visit disquiet and disruption upon families around the world, it is my sincere hope that this letter finds you and your loved ones in good stead.
More so than ever before, the times in which we now live call for clarity of thought. As this letter “goes to press,” government officials are tasked with frankly weighing public health against economic strength; business leaders are struggling to responsibly balance the wellbeing of their employees with the newly-heightened challenges of remaining a going concern; and families the world over are called to remember, and to rally around, that which they truly hold dear. With the forces of history so plainly at work, there is scant use for distraction or spin.
by Chad Meyer, CFA
By the age of twenty-five, some people have already changed or influenced our world. Charles Lindbergh, age 25, completed the world’s first solo transatlantic flight, pushing modern aviation forward in one 3,600-mile swoop. At age 24, Orson Welles wrote the script for Citizen Kane, widely considered a crown jewel of twentieth century cinema. During the Hundred Years’ War, Joan of Arc led the beleaguered French army to a momentous victory over the English at Orléans. She was just 16 years old. Alexander Hamilton, dead set on making a name for himself in our young republic, led a battalion to victory over the British at Yorktown. He was only 25 years old, when five days later the British surrendered.
by Chad Meyer, CFA
“May you live in interesting times.” Purportedly Chinese in origin, this cryptic maxim has been alternately interpreted as both a blessing and a curse. In that regard, it should strike a familiar note with American investors. As this newsletter goes to press, the country’s major news outlets are allocating equal front-page real estate to impeachment proceedings against a sitting president, to campaign efforts for the next one and to a foreign policy landscape with uncertainty spanning from Great Britain to Turkey. Blessing or curse, there is no denying these “interesting times.”
There’s nothing quite like springtime in Maryland. As the temperature slowly rises, our community returns to the pursuits that we hold dear. Gardening plans are launched into action, outdoor grilling resumes, and, in keeping with local fashion etiquette, wardrobes that for months relied on royal purple abruptly shift in favor of orange and black.
Of course, we aren’t the only ones sporting a new outfit: Mother Nature, after a few weeks of chilly indecision, has at last decided to put on her Spring dress. Nowhere is that more apparent than from our office’s vantage over the Tufton Valley, which is becoming greener by the day.
As you may have heard, the view isn’t the only thing that has changed around here. On February 23rd, after months of careful deliberation, we officially changed our firm’s name to Tufton Capital Management. And as we settle into our new look, I want to assure you that while the lettering on the door may have changed, the values that define us have not. We remain, as a team, deeply committed to protecting your today, growing your tomorrow, and honoring the trust you have placed in us—and we believe our new name more accurately reflects the strength of that shared commitment.
With our new firm name comes the inaugural issue of Tufton Viewpoint, which begins with our outlook for the economy and financial markets. In this article, we remind our readers that equity investing is a long-term proposition, as evidenced by the recently completed first quarter. Timing the market earlier this year could have led to big losses (through early February) while missing the market’s impressive recovery through March.
Also included in Viewpoint is a timely discussion regarding active versus passive investing and the rise in popularity (and pitfalls!) of ETFs. As active investors, the financial professionals at Tufton Capital believe that “being average” is not enough. We seek to provide our clients with returns higher than the relevant benchmarks over a full market cycle without taking any undue risk.
This quarter’s Tufton Viewpoint analyzes one of our favorite stock ideas: onshore oil rig driller Helmerich & Payne (HP). Finally, Trusts as a Planning Strategy, discusses how a properly structured trust can help you transfer wealth in the most efficient way possible.
As we enter our third decade in business, we’re as optimistic and excited as ever about the outlook for our firm and our clients. We wish all of you a very happy spring, and thank you again for your continued support!
As we look back at last year’s financial market results, it appears at first blush that we had a very quiet, uneventful twelve months in the investment world. The Dow Jones Industrial Average (DJIA) increased a mere 0.2% (including dividends), while the S&P 500 eked out a 1.4% total return. But like the proverbial duck, calm on the surface but paddling like crazy underneath, there were indeed extensive market-driving global events throughout 2015 and the volatility that ensued.
Last year’s activity began with quantitative easing (QE) from the European Central Bank, followed by a spike in bond yields. As the year continued, we experienced the Greek drama, a stronger U.S. Dollar, a continued slide in commodity (namely oil) prices, and ongoing concerns over growth in China and other emerging markets. The terrible events in Paris in November and the increased threats of global terrorism continued to dominate headlines. And let’s not forget the Fed! After months of “will they or won’t they”, Federal Reserve Chair Janet Yellen and her Committee presented us in December with the first shortterm interest rate increase in almost ten years.
What do these events mean for investors as we look into the future? The volatility we are experiencing serves as a reminder: markets “climb a wall of worry” in the long term. That is, while things can and do get very choppy, investors need to hold on and stick to their long-term goals. Part of our job at Hardesty Capital Management is to guide our clients through these turbulent times, helping them to focus and not react emotionally. Back to the proverbial duck, our role is to analyze and manage the “craziness” that exists beneath the surface. Our goal is that this allows our clients to live calmer lives and focus on other, more important things.
We begin this quarter’s Hardesty Horizons with our firm’s outlook for the economy and financial markets beginning on Page 2. As you’ll read in our investment analyses throughout Hardesty Horizons, we continue to be cautious but still positive on the equity market and are forecasting a low single-digit percentage gain for stocks this year. While we anticipate a slightly positive year for equities, we foresee another year of significant volatility in getting there.
Also included in this Horizons issue is a timely discussion starting on Page 4 of the benefits of value investing over the long term. The investment professionals at Hardesty Capital Management have long subscribed to the value philosophy, seeking to purchase a dollar’s worth of assets for fifty cents. We continue to be confident that value investing will outperform growth investing over a full market cycle.
This quarter’s Hardesty Horizons analyzes one of our favorite stock ideas for the New Year: Qualcomm (QCOM). While QCOM’s business of making semiconductors might not be overly exciting to some, the company’s prospects and stock’s valuation excite us! Finally, our article on Pages 7-8 discusses the complications of transferring wealth to the next generation and how to avoid possible pitfalls.
As we enter our third decade in business, we’re as optimistic and excited as ever about the outlook for our clients and our firm. We wish all of you a very Happy New Year, and thank you again for your continued support!
The volatility that we’ve experienced in the global markets in recent months serves as a great reminder: although markets generally “climb a wall of worry” over the long run, they don’t do so in a straight line. While the first half of 2015 resulted in a flat S&P 500, this year’s third quarter brought the much-anticipated correction that we (and much of Wall Street) had been patiently awaiting.
But while corrections are no fun for investors, they are a normal and necessary component of the long-term market cycle. Moreover, market pullbacks give value investors like us opportunities to put our expertise to work. Our firm has been finding value in stocks such as Emerson Electric (EMR), which now trades at 12 times next year’s earnings while offering a 4.4% yield (please see our EMR analysis on Page 7). And with companies such as Procter & Gamble (PG) and Chevron (CVX) yielding 3.7% and 5.5%, respectively, good investments become even better ones in down markets. So while corrections (more…)
Dear Clients and Friends,
It is with great sadness that we announce the passing of our firm’s co-founder, James D. Hardesty. Jim died peacefully on May 12th after complications from an ongoing, long-term illness.
Jim was a brilliant, thoughtful man. He was truly an intellectual and known for his photographic memory. Jim’s ability to recall names and dates with precision made him a renowned storyteller. Also renowned, as he would admit, was the long-windedness of those stories.
Over the course of his life, Jim became successful because he lived his passion. Rather than playing golf or tennis, he chose to fill his time reading, thinking, and analyzing balance sheets. A protégé of Benjamin Graham, Jim always tried to instill his love of the brilliant simplicity of value investing by giving all new hires a copy of Graham’s 1949 book The Intelligent Investor.
Jim had recently retired from Hardesty Capital, the firm he co-founded in 1995. His vision and skill blossomed into a firm that is now at all-time highs in every conceivable measure. He leaves a remarkable legacy.
Please keep Jim’s wife Lindsay and daughter Ellen in your prayers.
Sincerely,
The Hardesty Capital Family
In today’s highly regulated world of retirement planning for your business and your employees, owners offering 401(k) plans have the increasing responsibility of serving as a fiduciary to the plan. Not meeting your fiduciary duties as a plan sponsor is a violation of new ERISA regulations and leaves you vulnerable to potential litigation if the plan underperforms.
As the owner of a business with a 401(k) plan, you and your board have a legal obligation, or a fiduciary duty, to act in the best interest of your employees. Many unsuspecting owners, or plan sponsors, hire outside advisors to oversee their plans who are not considered fiduciaries. By hiring non-fiduciaries as advisors (such as investment brokers or insurance agents), your legal responsibilities may not be upheld. Since these salespeople may put their companies’ (and their own) interests first, your fiduciary duty to your employees could be compromised. While these non-fiduciaries may have a “suitability standard” to provide you with reasonable financial products, these offerings are often likely to benefit the brokers more than your employees. (more…)
When choosing an investment professional, there are many different avenues to navigate. Understanding the differences between Registered Investment Advisors (RIAs) and brokers will help you determine the best professional council for your investment needs. A Registered Investment Advisor is defined by the Investment Advisers Act of 1940 as a “person or firm that, for compensation, is engaged in the act of providing advice, making recommendations, issuing reports or furnishing analyses on securities, either directly or through publications.” As a Registered Investment Advisor (RIA), Tufton Capital Management has a fiduciary duty that sets us apart from stockbrokers and other salespeople who charge a commission for executing sell orders submitted by their clients. (more…)
