Long term: Stay the course

In this brief note, Nuclo Independent CIO’s head of global equities, Claudio Brocado, discusses our firm’s approach to investing in stocks. Those of you who have known Claudio for some time have undoubtedly heard about his very long-term-oriented approach. Back to his days managing the Fidelity Latin America fund, his turnover was extraordinarily low. Even in Latin America, where economic and market volatility tend to result in frequent and rapid “regime changes” in markets, Claudio strived to stay the course.

Many professional investors appear to think that, if they are sitting still, they are not doing the best possible job for their clients. Portfolio turnover, a sign of “activity” can — in the minds of some, at least — be equated with diligence. Sometimes the best approach is to do nothing. There are, arguably, many more perceived regime changes — when it comes to investing — than actual ones. Claudio believes, among many other things, in tax efficiency. In his framework of the net positive score (NPS), he attempts to assess the aftertax value of trading out of a particular security just to attempt to buy it back at a lower price at a subsequent point in time.

We appreciate that each individual investor’s tax considerations are different and possibly unique. Still, everything else being equal, we tend to avoid ‘overtrading’ in order to keep taxable events to an absolute minimum. This is, in Claudio’s view, yet another positive factor in having a long-term approach to equity investing. For more on what we perceive to be a somewhat unique approach, please read on…