Kovitz Investment Group: Q2 Shareholder LetterVW Staff
The Kovitz Investment Group (KIG) Equity Composite increased in value by 4.2% (net of fees) during the second quarter, while our primary benchmark, the S&P 500 (INDEXSP:.INX), increased 2.9% for the quarter. Year-to-date through June 30, 2013, the KIG Equity Composite has returned 15.4% versus 13.8% for the S&P.
Kovitz Investment – Investors in the Recent Quarter
Even after a strong, double-digit gain in the first quarter and seemingly every market commentator calling for a correction, investors continued to put a strong bid under stock prices in the most recent quarter. There was a minor hiccup towards the end of the quarter following comments by the Federal Reserve relating to when it would end its bond buying program (more on this later) and fears of a severe economic slowdown and liquidity crunch in China, but it could hardly be classified as a bona fide “correction” as the S&P 500 (INDEXSP:.INX) closed the quarter less than 4% from its all-time high reached on May 21st. The only certainty in the future is that there will be a correction. We just don’t know when that will occur and neither does anyone else.
Trying to predict the timing of a correction may be a fascinating parlor game, but it is of no practical use to a real investor. Pragmatic investors accept the fact that correctly calling turns in investor psychology is a guess at best and has ultimately proven to be a poor substitute for an investment strategy. Instead of engaging in such games, our approach seeks to minimize risk of permanent loss of capital by selecting equity investments on the basis of value and the underlying economics of the business and shuns the timing of purchases and sales based on an expectation of where the market may be heading. In other words, our opinions are tied to the long-term prospects for specific companies and are not based on guessing short-term movements in the equity markets.