South Atlantic Capital is an independent investment advisor, located in Wilmington, North Carolina and is registered with the State of North Carolina and the Commonwealth of Virginia.
At South Atlantic Capital, we essentially ignore broad asset allocation and sector weighting. We are not market timers, trying to predict economic or market changes over the short term. We think it would be a distraction to us and most likely a disappointment to our clients. We spend little time trying to forecast the economy. We feel that buying undervalued stocks, as opposed to trying to predict markets or the economy, is the best way to reduce risk of principal loss for clients, creating a "margin of safety" or cushion against overly optimistic earnings expectations or negative unexpected developments or the effects of market swings. These companies are able to find a seat if and when a poor economy or major problems in the financial system cause the music to stop playing.
As opposed to what we see as failing conventionally with too much emphasis on diversification and asset allocation, we try to grow a client's net worth over time, adjusted for inflation, by investing in asset classes with high expected returns such as equities, in a risk averse way. We look to invest at reasonable prices, trying to buy a dollar for $0.70. We look to sell the companies once we believe they are overvalued or if a better investment presents itself and then, we take into account tax consequences in the decision. Large positions are trimmed when their market prices reflect underlying values.
The only way we feel we can accomplish this strategy consistently is to limit our investments to companies whose prospects we clearly understand. If a stock price drops below our cost, we typically are more interested in buying than selling. Without having thoroughly researched a company and its competition, many investors are prone to sell when they should be buying. We will retain cash in the absence of good ideas.
Our approach revolves around the belief that a company's assets and its enterprise value can be evaluated independently of the stock market. Investing in companies that are undervalued provides fundamental advantages. Over the long term, stock prices reflect the growth of corporate earnings plus dividends. Speculation adds or subtracts little, during short time periods, and does not change the basic measure of value. We look for companies that will prosper for the foreseeable future based on a sustainable competitive advantage. This results in holding investments for 3-5 years or longer.
We believe our investment philosophy and long term orientation has been the key to our success over time. While we can't be confident that what investors consider popular today will be popular tomorrow, we can be confident that the market will ultimately recognize a company's true value.