The Intrepid Balanced strategy invests primarily in US stocks and corporate bonds and seeks to protect and grow your capital by generating strong risk-adjusted returns over a full market cycle.
Is This Strategy for You?
an investment horizon of at least 5-7 years and minimum investable assets of $3 million.
exposure to a moderate allocation mix of U.S. and international stocks and corporate bonds.
seeking a portfolio with differentiated holdings and a low correlation to market indexes.
maintain a long-term focus and tolerate underperforming the major indexes in the short run.
Our goal is to provide positive absolute returns and to outperform the Strategy’s benchmarks, the S&P 500 and 60% S&P 500/40% ICE BofAML US High Yield Index, over a full market cycle.
The Balanced strategy is the predecessor to the Intrepid Capital Fund and is managed with the same objectives and constraints. It contains some of Intrepid’s highest conviction ideas and and invests in U.S. and international stocks of all sizes, as well as below-investment grade corporate bonds that we think are not efficiently priced by the market.
Our process is designed to capitalize on market fear, volatility, and the investment bargains that irrational and emotional investor behavior inevitably generate.
Frequently Asked Questions
Our core criteria are the same for both equity and fixed income holdings. We want to own businesses that are understandable and that we can value with a high degree of confidence. These companies are typically mature, established leaders in their industries, generate consistent cash flows, have strong balance sheets, and are run by management teams with a history of adding value and acting in the best interests of shareholders and bondholders. Often, the stock and bond prices of these companies become depressed when the market unfairly punishes them for issues that we believe are temporary or fixable, which creates an opportunity for us to buy at a discount to intrinsic value.
For bond holdings, we aim to generate an attractively higher yield than comparable maturity US Treasury securities without incurring a significant risk of default. We aim to invest in securities of companies with low leverage ratios and a history of prudent capital allocation decisions. While the strategy does invest in investment grade debt and larger issues, generally the securities in the portfolio are part of smaller issues of less than $500 million. We believe our size is an advantage in this area, as many bond managers are too large to invest in these issues, which can create attractive mispricing opportunities.
Unlike most investment managers, we are content to hold cash if we cannot identify enough undervalued opportunities to be fully invested. Cash levels have historically been higher after strong market gains, as we exit holdings that have risen above their fair value, and lower following steep market declines as we add new undervalued holdings.
On average, the strategy targets a ratio of roughly 60% equities to 40% bonds, although cash levels and available opportunities may cause actual allocation to differ materially. High yield fixed income securities may range anywhere from 20% to 60% of portfolio
Portfolios are relatively concentrated and typically own between 20 and 75 holdings, including high yield bond issues of 10 to 40 companies. We believe this allows our highest conviction ideas to contribute meaningfully to performance while still providing adequate diversification.
Equity investments are typically reduced in size as the share price approaches intrinsic value and sold when the price exceeds intrinsic value. We may also sell if our estimate of intrinsic value is revised such that the current price no longer represents a discount, or if a holding exceeds our maximum position size. Fixed income securities are typically exited either at maturity or when the price is too high and the yield too low to be supported by business fundamentals.