Worried About The Market? Call Suncoast Equity!

The recent dive in the stock market has many stock brokers, mutual fund managers and investors worried about the future. Suncoast Equity Management (SEM) Chief Investment Officer and owner Don Jowdy says that investors should remember that investing in common stocks over the long-term is a worthwhile experience, but it usually is a two-steps-forward, one-step-back process. The volatility in today's market doesn't seem to bother Jowdy. His philosophy isn't about predicting market trends; his approach is to build a portfolio of stocks you can hold onto for a long time. With Jowdy's program, sudden market changes should not jeopardize your future.

His company is new to the area, although Jowdy himself has been serving Tampa Bay investors for five years. He has been in the investment business for nearly 10 years and has avidly studied the investment techniques of some of the wealthiest men in the world. After his extensive research, he found the investment principles of Warren Buffett and Benjamin Graham to have the most consistent long-term results. Today, those who invested with the young Buffett in the 1950s are multi-millionaires. Like Buffett, Jowdy's concept is to use a disciplined investment approach focused on long-term results. "Our investment philosophy is unique in that unlike a majority of our peers, we believe that true wealth is created through investing in top quality companies for the long-term," explains Jowdy. He usually works with a portfolio of 15-20 stocks based on the highest quality companies whose earnings and subsequent value should grow for years to come.

"To invest successfully, you must think in terms of 10, 20 or 30-year periods," says Jowdy. Over time, no investment category (bonds, precious metals, real estate or collectibles) has performed better than common stocks. And this is in spite of certain short periods of time for common stocks — be it a single day or periods of up to two consecutive years or more — when the journey was not always pleasant. When you invest in common stocks, Jowdy says you should follow Buffett's advice: "If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes." Successful investing involves patience and a disciplined strategy for selecting and holding a small group of high-quality companies for the long-term. Those professionals who make a living at trying to "time" or predict movements on the stock market are rarely accurate, especially on a long-term basis, he claims. Even so, the net after-tax consequences of constantly moving in and out and then back in again versus a buy-and-hold strategy can be meaningful.

According to Jowdy, what is most important is to have the proper mindset regarding your approach to investing. It begins with an understanding that when you invest in a stock, you become a part-owner of that business, no matter how small your interest. Investing in stocks is not just becoming the holder of a piece of paper that fluctuates up and down a lot.

Another very important principle is safety, or guarding against a permanent loss of your capital. Approaching investing in this manner, Jowdy believes, gives you a big advantage over most stock market participants — professionals and individuals alike. He puts these principles to work in a five-step process he calls the Disciplined Investment System.

The first key to successful investing, he says; is to study a company's financial performance and strength. This means that you should assess the business to make sure it maintains an above-average return on capital. Secondly, it is necessary to check the company's track record and chose those who have a consistent operating history. In addition to examining the past track record, you also should select those with favorable long-term business prospects. "We want to own companies which have a sustainable franchise or business advantage — growth businesses," says Jowdy. He also suggests looking for companies in which the management behaves like an owner and says you should think of yourself as an owner, as well. "It is important to pick businesses that you understand and can identify with." He stresses, "by purchasing stock, you become an owner and should know how the company operates." The final step in successful investing is to assess the business value and invest with a margin of safety.

Using techniques outlined in his five-step process may seem simple enough and Jowdy admits that an individual could apply these himself, but he warns, "You must have solid discipline and patience and adhere to the rules and we can help you do that." He adds, "Investing does not involve timing the market. At least it's not factored into what we do here." His favorite companies include Mattel, Coca-Cola and Gillette.

Communication is an essential part of any successful investment program and Jowdy makes himself available for direct meetings with clients. "You won't find that at most larger firms, especially mutual fund companies," he says.

If you are interested in learning more about SEM, call (813) 963-0502 or visit www.suncoastequity.com. —SB