Asset Management Letter

Q3 2017 Asset Management Letter

October 16, 2017   ·   By   ·   Comments Off on Q3 2017 Asset Management Letter   ·   Posted in Asset Management Letter, News, Newsletters

Stormy Weather

Perhaps William Faulkner described hurricanes best when he said it was like “looking down upon a world turned to furious motion and incredible retrograde”. This hurricane season has been remarkable for its level of devastation and tragedy. However, at the same time the response of everyday people put in extraordinary situations has been nothing short of heroic. Consider NFL player, J.J. Watt, setting out to raise $200,000 for hurricane Harvey victims and raising over 30 million dollars at last count. Think of the linemen from all across the country who worked tirelessly to restore power from both hurricane Irma and Harvey. Finally, the first responders in Puerto Rico, some from as far away as New York, who were still providing support weeks later after hurricane Maria hit. Truly, if you have ever met personnel headed towards a natural disaster, then you know how encouraging the human capacity to help their fellow man, woman and child can be.
We bring this setting to the foreground of this month’s quarterly letter for two reasons. One is to pause over what matters most, expressing sympathy for all that have been caught in harm’s way. Two is to draw a parallel to investing. We realize there is a little leap of faith on this subject, but bear with us on this one. We consider “value” investing to be similar to picking up the pieces and getting back to work with what you know. When others are lost in a depressed state, the “value” investor is rebuilding their construct brick-by-brick because they know their intrinsic value deep down inside.
Having this “value” perspective has typically led to outperformance over the long haul (at least dating back to 1977 vis-à-vis the Russell 3000 Value and Growth indices), but there have been shorter time frames when “growth” investing has done better. We lean towards the value tilt given its historical outperformance, but we do invest in growth names as well. For instance, our growth managers are up between 14 to 27% thru 09/30/2017. However, the purchases of items like biotech and healthcare that were beaten down at the end of 2016 and are now up 25.95% and 20.79%, respectively, are the type of “value” moves you will continue to see us make. Financials are a similar area you have seen us add to over the past 18 to 24 months that rewarded significantly in 2016, but slowed down a bit this year as the sector is only up 13.44% YTD. However, we are still very comfortable with the upside potential of our financial sector holdings. Finally, our international positions have also rewarded significantly as our names are up between 20 and 32% for the year.
Of course, with a market up 14.24% this year, it is becoming hard to find cheap sectors. There are specific stocks within sectors that look cheap, but picking those names require significant skill and is usually best done with an active manager. We, of course, use several of those managers and think they are poised to outperform in a market rally that is nearly eight years old and facing the threat of rising interest rates. We will continue to use passive strategies in markets that appear cheap, but with many of these opportunities disappearing you will see us recommending more active strategies until the market corrects significantly. This goes for fixed income, as well as equities.
We hope this quarterly inspires you to remain steadfast against any and all “furious motion” outside your door, both figurative and literal, and, of course, reminds you of your intrinsic value. The weather of the past several weeks and the violence in Las Vegas have heightened our need to encourage others. Investing oftentimes requires optimism in the face of adversity so we certainly understand the need for support. Of course, investing is not just in stocks and bonds. It is also in people. Therefore, we find great solace in the heroes from the hurricanes or something as simple as the blood donors from Las Vegas that stood in line for three or more hours. The parallel to “value” investing is not wasted on us and we hope it resonates with you as well. Please know we value you and your relationship greatly.
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Compliance Disclosures

Statements made via this letter are the opinions of Creative Financial Group (“CFG”) and its advisors, and are not to be construed as guarantees, warranties or predictions of future events, portfolio allocations, portfolio results, investment returns, or other outcomes. None of the information contained is intended as a solicitation or offer to purchase or sell a specific security, mutual fund, bond, or any other investment. Readers should not assume that the considerations, suggestions, or recommendations will be profitable, suitable to their circumstances or that future investment and/or portfolio performance will be profitable or favorable. Past performance of indices, mutual funds, or actual portfolios does not guarantee future results. Future results may differ significantly from the past due to materially different economic and market conditions; investments in securities or other financial products involve risk and the possibility of loss, including a permanent loss of principal. Investments are not FDIC insured and have no bank guarantee.

Creative Financial Group (“CFG”) is a division of Synovus Securities, Inc (“SSI”), member FINRA/SIPC. Prior to
January 1, 2011, CFG was a separate registered investment adviser affiliate of SSI. Investment products and services are not FDIC insured, are not deposits of or other obligations of Synovus Bank, are not guaranteed by Synovus Bank and involve investment risk, including possible loss of principal amount invested. Synovus Securities, Inc. is a subsidiary of Synovus Financial Corp and an affiliate of Synovus Bank.

Investment products and services provided by Synovus are offered through Synovus Securities, Inc. (“SSI”), Synovus Trust Company, N.A. (“STC”), GLOBALT, a separately identifiable division of STC and Creative Financial Group, a division of SSI. Trust services for Synovus are provided by Synovus Trust Company, N.A. The registered broker-dealer offering brokerage products for Synovus is Synovus Securities, Inc., member FINRA/SIPC. Investment products and services are not FDIC insured, are not deposits of or other obligations of Synovus Bank, are not guaranteed by Synovus Bank and involve investment risk, including possible loss of principal amount invested.
Synovus Securities, Inc. is a subsidiary of Synovus Financial Corp and an affiliate of Synovus Bank and Synovus Trust. Synovus Trust Company, N.A. is a subsidiary of Synovus Bank.
Pursuant to rules adopted by the U.S. Securities and Exchange Commission governing federally registered investment advisors, we request that you take time to compare your account balances and statements issued by National Financial Services, who acts as the custodian for your account(s). We request you contact us immediately if you do not receive these statements or if the values reflected are materially different.

Cost basis reporting

If you buy and sell a security in a taxable account on or after the effective date, NFS will report cost basis for the sold security to you and the IRS on Form 1099-B. If you have a mix of covered and uncovered positions in the same security, NFS will report cost basis to you and the IRS for any covered position that is sold. NFS will apply the FIFO (First In, First Out) default method unless you inform us of a different method. Your cost basis method for all transactions must be final by settlement date. If you choose to change the default method, you can do so by notifying your Financial Consultant.

Use of Indexes

iThe investment return and style information and comparisons employ a variety of popular indices, and the index contents and strategies are the property of their respective companies (e.g., Dow Jones, Standard & Poor’s, Morningstar, Barclay Capital, Russell). Although the data is believed to be reliable, CFG makes no warranty with respect to the contents, accuracy, completeness, timeliness, suitability, or reliability of the information, which is represented here for informational use only and should not be considered investment advice or recommendation. None of the indices can be invested directly, and the return figures for these various securities indices are reported without management fees, trading costs, or other expenses subtracted from the returns, and are shown on a total return basis that assumes reinvestment of applicable capital gains and dividends. Components of indices may change over time. Small capitalization stocks are represented by the Russell 2000 Index. Mid Capitalization stocks are represented by the S&P Mid Cap 400 Index. Foreign stocks are represented by the MSCI EAFE Index and emerging markets are represented by the MSCI Emerging Markets Index.


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Creative Financial Group (“CFG”) is a division of Synovus Securities, Inc (“SSI”), member FINRA/SIPC. Prior to January 1, 2011, CFG was a separate registered investment adviser affiliate of SSI. Investment products and services are not FDIC insured, are not deposits of or other obligations of Synovus Bank, are not guaranteed by Synovus Bank and involve investment risk, including possible loss of principal amount invested. Synovus Securities, Inc. is a subsidiary of Synovus Financial Corp and an affiliate of Synovus Bank. You can obtain more information about Synovus Securities, Inc. and its Registered Representatives by accessing BrokerCheck