Inspired by Motley Fool co-founder and CEO Tom Gardner's Everlasting Portfolio.

To learn more about our Everlasting strategy, please watch the brief but insightful introductory video below...

Then simply scroll down to get a more in-depth look at everything from this strategy's goals and objectives... to who this strategy is designed for... to the particular portfolio management process it incorporates.


View a transcript of this video

Everlasting SMA: Philosophy and Strategy

Our investing philosophy hinges on five core objectives:

  1. Investing with quality management teams that build strong corporate cultures
  2. Owning businesses that take care of all of their stakeholders: customers, suppliers, employees, society, and shareholders
  3. Investing in businesses with sustainable competitive advantages
  4. Maintaining a commitment to long-term investing and very low turnover
  5. Paying a reasonable price for the company's stock

It is difficult to quantify a strong management team, a thriving culture, and a sustainable competitive advantage. Instead, we try to qualify them using various frameworks in order to determine which companies are the true standouts. For example, one tool we use is the “Say-Do” ratio. We'll look for the things managers say to investors in all of the communications we analyze, and then compare those to what management actually does. The higher the ratio, the more confident we can be when assessing what the management team is doing, why they are taking such actions, and how effectively they are running the business. In addition, we look at Glassdoor ratings, reviews, and comments as an indication of the health of a company's culture.

In his book Firms of Endearment, Professor Raj Sisodia found that companies that do "good" by taking care of all of their stakeholders tend to outperform the stock market by a considerable margin over the long term. Using the framework developed in the book, as well as the plethora of frameworks to assess the sustainability of a company's competitive advantage, we can make judgments about whether a company deserves a spot in the portfolio.

Once we find a company that meets this criteria, we are willing to pay a reasonable price, as opposed to waiting for a bargain price, for its stock. And we're very reluctant to sell. History has shown that wonderful businesses with great management teams and cultures of success have the ability to create tremendous amounts of value. By acting like business owners instead of stock traders, we allow the portfolio to have very low turnover. The most likely reasons we'll sell a stock out of the portfolio will be that the investing thesis has changed for the worse or we have found an even more compelling idea.

Portfolio Management Process

Portfolio Construction

The Everlasting Strategy will look to own 20-40 stocks at any given time, depending on the opportunities available in the marketplace. Within that range, the best ideas will receive larger allocations. The idea is to find a balance of concentration and diversification that will give us the best opportunity to outperform the market over the long run. Although we don't have limits, one could expect the top five investments to make up 30% of the portfolio or more.

Investment Selection

We select companies for the portfolio using fundamental research, with specific attention paid to the factors in the portfolio's goals and objectives. Although we do perform valuation work, it is not the dominant factor in the investment decision. The team uses a combination of the qualitative and quantitative analyses to determine the risk/reward profile of each company.

Position Sizing

We want to allocate the most capital to our best ideas, defined by the qualitative and quantitative factors above that lead to an assessment of the risk and reward associated with each investment idea. As such, we have set loose guidelines around position sizes:

Risk Low High
High Avoid 4%
Low 2% 6%

Actual allocations can vary, but we will not initiate a position of less than 2%.

Position Management

As stated above, we expect the portfolio to have very low turnover. Once we find a great business that meets the criteria discussed above and trades at a reasonable price, we would prefer to hold that position forever, if possible.

We will make adjustments to the portfolio over time, as new information about each individual company becomes available. But we do not expect to make frequent, significant changes to the portfolio. The most likely actions to be taken over time are:

  1. Purchasing additional shares of a stock already in the portfolio, based on improving risk/reward characteristics
  2. Selling portions of current positions in order to add a new position to the portfolio

Finally, we expect to be close to fully invested at all times. The team will hold a small cash position (2%-4%) at all times in order to be able to quickly take advantage of opportunities that arise in the marketplace.

Account minimums may apply. All investments involve risk and may lose money. MFWM makes no assurance that investment objectives will be met. Clients should be aware that their individual account results may not exactly match the performance of the Model Portfolios. Past performance is no guarantee of future results.

Motley Fool Wealth Management retains the right to revise or modify portfolios and strategies if it believes such modifications would be in the best interests of its clients.

Portfolio Managers

David Meier Bryan Hinmon

Investment Objectives

The Everlasting Strategy seeks to create wealth through capital appreciation. To meet this objective, the team will focus on:

Inspiration from the investment philosophy of Motley Fool co-founder and CEO Tom Gardner

Taking meaningful positions in the team's best ideas

Acting like owners of a business by being very reluctant to sell

Who Should Invest

The Everlasting Strategy is for investors who think like owners and understand the benefits that come with a long-term mindset, and are looking to build wealth, over many years, via capital appreciation.

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