Drystone Communications


 

October 13, 2017

The most important risk management tool for any portfolio is not excessive fine-tuning of the asset mix, but simply matching the amount of short-term bonds or other ready reserves to each client’s ongoing rate of withdrawal. With sufficient reserves, you avoid having to sell stocks or long-term bonds at an inopportune time and can more easily tolerate the eventual and inevitable return of volatility to those assets.

In other news...[Drystone’s two most recent individual stock purchases] share traits common to a number of Drystone stocks: each is a clear leader in a niche industry with very modest levels of competition, less risk of substituting products/services or new/disruptive entrants, and a dispersed base of customers and suppliers. Both stocks remain relatively obscure and thus, in our opinion, not overpriced.


July 14, 2017

For Drystone clients, we cast a wide but picky net in our search for attractive and appropriate investments and remain mindful of the variety of asset categories available. From that variety, though, straightforward stocks and bonds (and cash as needed) have provided the most productive, cost-effective and tax-efficient building blocks to construct portfolios all along the spectrum of potential return and risk – complemented by occasional and opportunistic additions from sub-categories like real estate trusts or high-yield.


April 18, 2017

[Our most recent Concentrated Investments individual stock purchase] represents a bit of a departure: most Drystone stocks have been less publicly visible companies from the industrial, healthcare and technology sectors, whereas [the recent purchase comes from an industry group that is] among the most “customer-facing” parts of the consumer sector. [The new purchase] shares important traits with other Drystone stocks, though, and illustrates two tendencies in our Concentrated Investment choices: toward less capital-intensive companies with lighter asset bases and cost structures; and away from companies suffering intense price competition.


January 17, 2017

Suffice it to say, regime change in D.C. has not significantly altered Drystone’s outlook for stock returns: in making portfolio decisions I still start with a baseline expectation for the S&P 500 Stock Index of average annual total return (price change+dividends) between 0-4% per year over the next five years and approx. 4-5% per year over the next ten years. The election surprise did slap a bit of the low-growth/low-inflation complacency out of bond investors, however, and yields have improved slightly. Although I’m still not buying many bonds beyond two years to maturity and most portfolios remain much more tilted toward stocks, I will welcome any future opportunity to add more bonds and other income assets, when prudent and in line with client preferences, and to supplement the very modest price appreciation I expect from stocks over the next ten years.


Drystone LLC investment portfolio manager