Tuesday, Feb 18th 2020

Flagship 101

Investor Update

Flagship is our first investment strategy. Here's a reminder on how it works.

Our Flagship strategy is built like an old-school hedge fund: 20 high-quality stocks with a personalized hedge, aiming for above-market returns over the long run.

We believe the Titan 20 are the rare compounders##

In investing lore, the holy grail is finding a collection of "compounders:" a basket of 10-20 companies that can compound (i.e., grow) capital at high rates of return each year, with low business risk. These are fundamentally excellent companies with long runways for growth. This is way different than investing in an average vanilla index which puts you in both good and bad companies.

Our job, with our Flagship strategy, is to put your money in compounders so that your capital has the best chance to grow at industry-leading rates. We believe the Titan 20 are the best of the best.

Our approach##

We believe in buying and holding for the long term. We update the Titan 20 once per quarter, but most stocks stay the same. (For instance, we've owned Google since our inception). With compounders, the idea is that you can hold onto them for a very long time and let them do the hard work for you.

We have a two part process to determine the Titan 20.

1) We narrow down the investable universe (there are several thousand stocks) by building an all-star basket of stocks (20-30) based on quantitative factors (the most common holdings of elite hedge fund managers measured by longevity, concentration, etc).

2) We layer in a qualitative approach using fundamental research. For example, we eliminate any stocks that we deem as low-quality businesses or which have poor risk/reward dynamics. We then actively monitor this basket for fundamental news, events, and special situations, and take action for clients when required.

Personalized hedge##

We also apply a personalized hedge to your account for downside protection.

When your portfolio declines for an extended period of time, you should have the chance to still make profits. It's called a hedge, and it can help reduce the risk of your portfolio and stem losses during tumultuous periods.

We institute this personalized hedge automatically by effectively shorting the market for all clients. The size of the hedge is determined based on your individual risk tolerance.

Historical performance##

Historically, our Flagship strategy has outperformed the market and our peers' most aggressive strategies, net of fees.

Performance Scorecard

Given the uniqueness of our Flagship strategy, it's hard to make a perfect comparison between us and other platforms, but so far we've delivered on our performance objective for clients.

See full disclosures on our website.

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