Wednesday, July 28, 2010

Summer Update and Double Dip Analysis

It has been a little while since I last had the opportunity to post and I thought I would provide a brief update on how my summer is progressing. But first, I want to thank everyone for the overwhelming outpouring of support after I created the post that asked for help in finding a summer internship. I literally received emails from people all over the world offering their assistance and guidance. I really appreciate all of the support and I hope that I can continue to create content and research that is both valuable and informative.

Thanks to my good friend Marcelo Lima, I was able to secure an internship position at West Coast Asset Management (WCAM) in Santa Barbara, CA. WCAM is a long only manager of separate accounts focused on high net worth individuals, institutions and charitable foundations. The firm was founded by Lance Helfert and Kinko’s founder Paul Orfalea. Anyone who attended the 2008 Value Investing Congress sessions in New York or California will probably remember the presentations made by Lance and CIO Atticus Lowe. Furthermore, Atticus was profiled in the April 2007 and May 2008 editions of Value Investor Insight and Lance makes regular appearances on Fox Business News and CNBC. Finally, Lance, Atticus and Paul are co-authors of the book, The Entrepreneurial Investor: The Art, Science and Business of Value Investing which has sold thousands of copies and has recently been translated in Korean.

If you would like to learn more about WCAM, I encourage you to check out the website at Additionally, if you are looking for a manager who is capable of handling both equity and fixed income separately managed accounts feel free to contact me or Andrew Firestone (of The Bachelor fame) at

My role at WCAM is to find new investments for the equity separately managed accounts. So far this summer I have extensively researched a number of companies, including two exchanges, a power transmission company and a couple of data processing and outsourced services firms. We are specifically looking for companies with a market capitalization greater than $1 billion which possess robust moats, resilient business models, strong and recurring cash flow generation and preferably a consistent dividend. If this sounds like a relatively defensive stance, that is precisely because it is. As a team we continue to believe that the US is at risk of falling back into a recession and prefer to be invested in companies that will prosper even in stressed economic circumstances.

It was in this context that I was asked to contribute to the quarterly letter that recently went out to clients. Given our outlook, my goals were to shed some light on the risks that we see brewing in the US economy and explain to clients why we are positioned cautiously. There are clearly a number of people talking about the risks of a double dip recession. However, I decided to highlight those that I thought were most relevant to equity investors and our clients. I hope you enjoy my updated analysis (in Scribd format to maintain the formatting) and will stay tuned for additional posts in the near future.

5 Reasons to Fear a US Double Dip