Investment Philosophy
We invest in securities that have the following attributes


1

Business Strength

We seek out industry leaders with enduring competitive advantages within their supply chain (price setters vs. price takers). In addition, we emphasize companies with above average returns on equity and capital, and those who are consistent producers of free cash flow throughout the economic cycle.

2

Management Quality

We invest in ethical companies with high-integrity management teams. We look for companies that demonstrate a deep understanding of the capital allocation process and that aim to create value for shareholders beyond conventional methods.

3

Valuation

The easiest way to generate excess returns (above market returns) is to pay less for a security than its conservative valuation. Much of our time is spent figuring out what securities are worth and waiting until it is priced substantially below this level. Patience is the cornerstone of successful investing.

4

Catalysts

At GDS, our preference is to own securities (debt and equity) in companies that are undergoing change. Academic studies show that the market is delayed in accounting for material changes in company strategy, business composition and capital structure. Therefore, consistent with our goal of finding misunderstood and mispriced securities, we routinely analyze and evaluate spin-offs, mergers, restructurings, rights offerings, asset sales, recapitalizations and other special events.

HOW IT WORKS

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Custody

Your account will be held in your name at a full-service broker, such as Charles Schwab or TD Ameritrade.
Your money will not be co-mingled with other clients as is common practice with hedge funds and mutual funds.

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Appropriate Diversification

Client accounts typically own 20 different positions. Conventional wisdom suggests that owning more stocks is a less risky approach. When in fact, the opposite is true. Owning 20 stocks allows us to concentrate on our very best ideas without compromising the benefits of diversification. This fact is lost on most investment professionals and mutual fund companies that routinely over-diversify client portfolios.

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Efficient fee structure

We charge a flat percentage fee based on account value. We do not charge incentive fees commonly charged by hedge funds. In addition, we do not invest in mutual funds, thereby eliminating the dual fee structure commonly charged by many financial advisors.

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Transparency

All account activity can be viewed online, at any time, with comprehensive access to accounting, trade activity, current holdings and cash activity.  THIS IS NOT THE CASE WITH MUTUAL FUND INVESTMENTS.

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No conflicts of interest

Most investment advisors steer their clients into a small group of funds based on national “pay to play” agreements with those mutual fund companies. Our business model is wholly disconnected from these types of conflicts.

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Account customization

Every account is managed to the needs and objectives of the individual or institution.

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Research

All research related to portfolio activity is performed in-house.  We are wholly unconnected to Wall Street’s flawed, biased research.