Overview
Our Mission Statement:
Integrity. Excellence. Trust. Honesty. Hard work. Seemingly simple principles, sometimes overlooked in business. Yet our founder, Tony Morgia, so believed in these very principles that he built his business on them. And since 1968 they have guided The Morgia Group. Our clients entrust us with their financial lives, and we take that personally. Our clients' trust and our reputation are the two most valuable assets we manage. That makes our mission quite clear: to deliver quality investment advice, and act in the best interest of our clients, without exception.
Pre Investment:
An investment journey, as with any journey, must begin with two questions: What is my current location? And where is my destination? Unfortunately too many investors have never taken a bird’s eye view of their entire financial situation let alone quantified their specific financial goals (their destination, if you will) with any level of precision. We bring a portfolio manager’s viewpoint to our clients’ financial health – we analyze a client as we would a stock. How strong is their balance sheet? Is their free cash flow positive or negative? Only after we have ascertained an investor’s current fiscal health and established their financial objectives, will we move on to investment strategy.
There are many possible routes from point A to point B. Over the last 42 years we have seen and vetted the major ones. Needless to say we have strong opinions as to the correct path – and the correct strategies and tactics to navigate this path.
Most individual investors and too many institutional investors have not adequately formulated their investment policy. Logical strategies and tactics based on intense research and study are the only prudent solutions. There are no shortcuts. Experiences, long hours and occasionally, unconventional thinking, are what put the odds in favor of success.
Our Investment Process:
We believe that the future direction of the stock market is highly unpredictable. There are far too many unknowable factors that can come into play. We have seen overvalued stocks continue to get more overvalued for years on end. We have seen very inexpensive stocks get to almost absurdly low levels. We have seen planes crash into buildings. In short, we have seen the unpredictable happen. Since we can’t control the market direction – we must control that which we can. We can control whether we invest in companies with high debt levels or low debt levels. We can avoid companies with high price-earnings ratios. We can recommend a balance of stocks, bonds and cash. We can avoid the popular but expensive investments. In other words, we can control our risk levels.
In fact we believe a successful investment portfolio is the result of multi-layered risk control – a disciplined striping away of as many risks as possible. We do not subscribe to the commonly held belief that to get higher returns it is necessary to take on higher risks. On the contrary we think that by avoiding certain risks, an investor can improve their long term performance.
Strategies:
Core Equity:
In our stock portfolios we look at long-term investing a bit differently than the norm. Many investors believe it is advantageous to hold on to most stock positions year after year. We believe it is more important to sit patiently on the sidelines simply watching a stock - for many years in some cases. We think that there are only a few times per decade when the average company’s stock is primed for a purchase. Therefore we search very broadly for candidate companies to include in our portfolios. With thousands of company stocks to choose from, we can usually find a few dozen worth purchasing.
We will consider a stock from any country, of any size, in any industry. We use a multifaceted proprietary process to screen through approximately 5000 stocks per month. We favor companies whose earnings growth has outstripped the growth in their stock price – the bigger the discrepancy and the longer the situation has persisted, the more interested we become. Promising candidates will then be subjected to an inspection of their financial statements – if possible, as far back as 15-20 years. We feel that simply looking at two or three years worth of data is not enough to get a true picture of a company’s financial habits. For instance, we may want to see what happened to a particular company’s debt levels during the last two recessions. Or how a company acquired a cash position they have on their balance sheet – was it earned, was it borrowed or perhaps they issued more stock (and if so, did they issue that stock at an opportune price or were they under duress). As like most things – it’s the details that matter.
At this point we may have thinned out our candidates to two or three potentially actionable ideas. But before any purchase, we search out research reports on the target companies, favoring to read those that disagree with our thesis. If that does not sway our opinion, we will purchase the stock in our portfolios.
We will use cash opportunistically if we cannot find suitable buy candidates.
Macroeconomics: another angle of attack when searching for investment ideas comes from broader theories or ideas. These can be demographic trends or specific situations in various regions or countries. A macro investment may be a specific country’s currency, a particular industry or even a hard asset such as gold. Many times our macro-ideas will take the form of danger avoidance. This may happen if we see a particular industry or country taking on excessive debt levels or spending too much money on what we feel to be inflated asset prices.
Our Opportunity Portfolios take a similar approach to our core equity accounts but have a much stricter mandate. Here we use a similar methodology to search for our best ideas but only hold them for approximately four months so as to make room for what we believe to be superior new candidates. Due to the higher turnover we prefer to use this strategy in tax-free accounts such as IRAs or pensions.
We have a few other stock portfolio strategies that are tailored for specific needs such as a client’s desire for dividends or mutual funds – the methodologies discussed above are used to implement these mandates.
Fixed Income Account:
Our goal here is straight forward - protection of purchasing power. What good is it if your fixed income investment averages 5% but the cost of living goes up 10%? With any bond purchase, we spend considerable time determining the soundness of the issuer – even if the issuer is the U.S. government. We search for value in the bond market using various tools and tactics. Like the stock market, the bond market presents different opportunities at different times. We take a bit of a contrarian stance and tend to favor the out-of-favor. We look at the underlying value and the associated risk and then determine if the purchase is justified. Also like the stock market, avoiding the big mistakes is extremely important. Lastly we feel it is very important for our clients to know that when they see a purchase or sale of a company in one of their portfolios, that we have personally bought the same stock at the same time for the same price. It doesn’t mean that the investment idea will be profitable, but it does mean that we take every transaction personally. Mistakes are a given, but it’s the day by day, year by year grind of hard work, difficult decisions and countless hours that we believe make the difference.
You worked hard for the money that you have accumulated and the investment world can be a dangerous place if approached without a well thought out game-plan. With preparation and planning, however, it can be quite rewarding.
All plans, however, are only as good as their execution - they must be put into action. We all know the procedure for running a marathon – simply keep running for 26.2 miles. But it’s not enough just knowing how to do something. Actual doing is another matter. It takes discipline and hard work, things that have been a way of life at The Morgia Group for 42 years. And discipline and hard work have their rewards. Join us, and we’ll show you.