Blog 1 - GET READY TO RUMBLE!

This educational series can be a strategic edge for long-term investors to build and manage a portfolio of quality, compounding growth stocks. Expectations should be to consistently out-perform the S&P 500. Yes, it is possible. If you are a long-term investor and desire to deploy active portfolio management more effectively, then welcome!

"Victorious warriors win first, then go to war. 

Defeated warriors go to war, then seek to win."

~ Sun Tzu, Chinese General (544 BC - 496 BC

THE MOST RUTHLESS ARENA ON PLANET EARTH: THE CAPITAL MARKETS

Sun Tzu is often quoted in matters of conflict.  The financial markets are no different.  All who enter the capital markets arena desire to achieve financial betterment. Yet few are well prepared to face the perpetual conflict and aggressions. Successful investing requires a willingness to learn, reflect, and adapt. Even the best investors cannot expect perfection.  While courage is essential, it is not always rewarded. To be victorious, Sun Tzu wrote:

• Be prepared, and wait to take the enemy unprepared.

• Know when to fight and when not to fight.

• Know how to handle both superior and inferior forces.

• Winning requires the same spirit throughout all an army’s ranks.

• Have the military capacity but do not be impeded by the sovereign.

• Allow your enemy to defeat themselves.

Translation: Winning more consistently requires:

• Setting objective(s), a plan, and the discipline to follow your plan.

• Being better informed than your counterparts.

• Choosing quality assets worth fighting for.

• Being proactive to dictate the terms of battle.

• Knowing your vulnerabilities and setting continual protection.

• Seeking critical feedback, including from within.

The capital markets are never personal. To become flustered or angry cedes the advantage to the anonymous adversaries. Expect that no mistake, nor emotion, will go unpunished. Be the calm that the markets are not. 

THE OGF

In this 14-part series, each blog will progressively, introduce more comprehensive techniques as practised daily by the author in his role as PM of a core North American investment fund. By addressing the multiple tactical methods incrementally, investors can choose which part of their game plan to refine. No matter how far into the investing series you go, all the techniques presented, contrarian and protective, are deployed daily by the PM.

"...investing passively (buy & hold) in the stock market (S&P 500) has generated 8.3% CAGR..."

BACKGROUND

The blog series is based upon “The INVESTING OASIS: Contrarian Treasures in the Capital Markets Desert” written by the author and published by J. Wiley & Sons Ltd.  While the book outlines in full scope the methodologies and techniques, the blog series will provide select incremental, value-creating concepts that investors can put to immediate use:

1. GET READY TO RUMBLE!

2. BEHAVIOR CAN BE YOUR SUPERPOWER

3. PICKING QUALITY COMPOUNDERS (Tier 1)

4. SHAPING THE PERFORMANCE CHARACTER OF A PORTFOLIO (Tier 1)

5. THE TRUE MAGIC OF DIVERSIFICATION (Tier 1)

6. MERITS OF AN EQUAL WEIGHT PORTFOLIO (Tier 1)

7. IMPROVE THE BUY-IN (QARP) (Tier 1)

8. CONTRARIAN REBALANCING (Tier 1)

9. CASH AS A STRATEGIC WEAPON (Tier 1)

10. INCOME HIDDEN IN PLAIN SIGHT (Tier 2)

11. GENERATING OPPORTUNISTIC ALPHA (Tier 3)

12. EFFECTIVE TACTICAL LEVERAGE (Tier 3)

13. PREPPING FOR UNCERTAINTY (Tier 4)

14. PROFITING FROM PROTECTION (Tier 4)

The author is sharing his knowledge from 25+ years in a progressive career of education, teaching, high net worth advisory and asset management roles with several prominent Canadian investment management firms, including industry stalwart, Phillips, Hager & North.

The Oasis Growth Fund (OGF) was originally founded in 2016 as a Canadian Equity fund. In 2020, the mandate was changed to compete with the best core North American funds with a focus to out-perform the S&P 500. In 2022, the legal structure was finally changed from a corporate class series to a trust series.  

Since 1980, investing passively (buy & hold) in the stock market (S&P 500) has generated 8.3% CAGR despite three downturns exceeding 30%. That should be fine for most investors, yet to improve upon this average requires active management, a plan and good capital markets behavior. 

METHODOLOGY

The Oasis Growth Fund purposefully deploys 4 tiers of contrarian methodology across 4 distinct time horizons:

•Tier 1 - Predictable long-term core growth (decades) – Buying quality, compounding businesses at slight discounts (QARP[1]), then deploying periodic rebalancing. This ‘buy & rebalance’ approach relies upon the businesses to innovate and create value at the corporate level while the investor adds value by selecting stocks generating superior performance than the S&P 500 and through periodic contrarian rebalancing (buy low, sell high) as the share values of individual stocks ebb and flow. To find the investing gems requires up front research and due diligence, or just check-in periodically with the GOF holdings on The Investing Oasis site. Once establishing a core portfolio, more of your time can be spent generating additional income and alpha through Tiers 2 and 3. 

•Tier 2 - Predictable short-term share price undulations (weeks/months) – In addition to the core stock dividends, an investor can expect to harvest another 2-4% of income (annualized) by writing (selling) contrarian short-term OTM[2]Covered Calls (CCs) on their core stocks as share prices gradually ebb and flow higher. 

•Tier 3 - Unpredictable medium-term disruptions (annual) – This is the opportunity to generate income and alpha for a portfolio by opportunistically writing (selling) cash-secured Puts[3] on temporarily impaired (for non-material reasons), non-core, quality growth stocks.  The premiums generated (returns) will depend upon the indiviual stock, the duration of the contracts and whether they are written OTM, ATM or ITM[4].  

•Tier 4 - Protection across all cycles – Deployment of Stop Loss orders are continually deployed to realize profits and to periodically safeguard against losing the original invested capital. Also, as partial portfolio insurance, contrarian hedges are incrementally installed during periods of low volatility to potentially capture the upside of volatility during market upheavals (corrections and bear markets). 

"Each investor has a different breaking point. For many, it is far too low. The Investing Oasis blog series should substantially raise that tipping point."

Whether you have yet read "The INVESTING OASIS", or signed-up for the "INVESTING OASIS Trade Reports", at the end of the day, what an investor does during 'wild times' will become their fate. Each of us has a breaking point. For many, it is far too low. Experienced investors know that volatility is the key to investing. Without uncertainty, there would be few opportunities to profit. Yet the key is not to capitulate too early into a pull-back and not too late into a bear market/crash. Knowing the difference is based more on intuition, and only truly understood in hindsight. The Investing Oasis blog series intends to raise your ability to become a better capital markets participant. And since the markets roll-over every 2-4 years on average, it should help to become better prepared.  A financial storm is forever on the horizon. We just don’t know it's ETA.

INVESTING BELIEFS

Here are the concepts that underpin the author's investing thesis: 

• Stocks allow investors to share ownership with some of the world's greatest intellects.

• In the short-term, markets are emotional beasts. In the long-term, they are highly predictable.

• A diversified portfolio of North American stocks is a proxy for the global economy.

• Consistently profitable businesses with healthy balance sheets and visionary leaders make better investments. 

• Businesses that pursue prudent practices tend to be ESG compatible. 

• Every trade should either enhance portfolio performance, reduce volatility, or diminish undue risks.

• Contrarian practices render better results than following the crowd.

• Risk management should be proactive and woven into every decision.

• Quality stocks will survive even the worst of market purges.

• Discipline, patience, and courage will influence results more than tactical trading.

• As strategic weapons, cash and debt reserves should be deployed discerningly. 

• Financial wealth combined with our physical and spiritual health are the foundations of our well-being. Harmony resonates in keeping balance. 

SHARING IS CARING

If these blogs resonate, it would be appreciated to share this series with others who may benefit from the education and insights offered.  Equally, your feedback and questions are always appreciated.  In a community of mindful participants, education is a strategic advantage.

Jay T. Mason, CFA, CFP manages the Oasis Growth Fund and is the author of

“The INVESTING OASIS: Contrarian Treasures in the Capital Markets Desert”,

as well as the blog series: ‘More Buck for Your Bang’.

 ______________________________

The Oasis Growth Fund is Series O of the Fieldhouse Pro Funds Inc trust series available by Offering Memorandum in Canada through select Financial Advisors. This education series is not intended as a solicitation for investment in the Oasis Growth Fund nor is it sponsored by Fieldhouse Capital Management Inc.

[1] Quality At a Reasonable Price

[2] OTM – Out-of-the-money.  Call options are sold at a Strike Price on individual stocks well above their current share price to minimize the possibility of having a position exercised out of the portfolio. The premiums generated are retained by the contract seller (investor).  

[3] Cash-secured Puts – Writing (selling) Put contracts is the same as deploying leverage. As long as a portfolio has adequate cash or available margin to cover the potential exercise of a Put contract against the investor, the position will be considered “cash-secured”.  

[4] ATM – At-the-money. ITM – In-the-money. These terms refer to whether the chosen Strike Price of the Put option is equal to the current share price (ATM) or higher than the current share price (ITM).