Compass Capital Management maintains a concentrated portfolio.
July 2008 |
by
Tony Carideo
"Stay Positive" by Tony Carideo.
Minneapolis-based Compass Capital Management is one of the Twin Cities’ oldest wealth management firms, having just this year celebrated its 20th anniversary. The firm has $445 million under management in stocks and bonds, with a roster of 155 clients. A team of five managers has accomplished this while remaining unanimous on all their investment decisions. Since its founding, Compass has stuck with an investment style that maintains positions in only 25 stocks, making it a very concentrated portfolio with an equal dollar weighting in each position. About 65 percent of the firm’s assets are invested in stocks, and to a limited extent, stock mutual funds, and about 35 percent in bonds. Charlie Kelley, one of the firm’s four founders, discusses the importance of regular rebalancing, capitalizing on globalization, and how true wealth is made with one stock.
These days, how much do you worry about the price of gasoline and Oreo cookies?
CK
I don’t worry a great deal about it. Economies are cyclical, and I believe we’re just going through a cycle. It’s very easy to focus on negatives instead of the positives. As we sit here, I’m truly amazed that the stock market is only down 5 percent [as of mid-May] after what we have just gone through. That tells me there is something fundamentally underneath that must be very strong.
Do you think that the market has properly discounted the price of oil and the rising price of food?
CK
I think it has. The market on any given day trades on emotion. I don’t think there’s any efficiency in the market on any given day, but over a long period of time, I think it becomes very efficient. And over three, five, or seven years, all of a sudden you can see the trend. When I think about risk in the market, I think the biggest risk is something that is going to be outside our control that we can’t even fathom, such as the World Trade Center [attack in 2001]. No one viewed that as a risk. The risks we can quantify—oil inflation or the price of wheat—are the norm. The risks I fear are the ones I can’t see.
