This article is authored by MOI Global Instructor Jim Roumell, president of Roumell Asset Management, based in Chevy Chase, Maryland.
We have long warned of an expensive overall stock market. Due to the lack of compelling valuations during this period, we have been maintaining a defensive portfolio posture with elevated cash balances. That cash provides us with the necessary dry powder to opportunistically deploy capital in a market sell-off.
However, our security selection process, held in concentrated positions, which allowed us to perform well despite a roughly 50% equity exposure over the past few years, has worked against us during the recent market turmoil. When liquidity evaporates for small and micro-cap securities, no matter how well-capitalized, bids drop. During these times, we must reexamine our company-specific assumptions, in light of their current (lower) prices, and decide whether any action is needed. Our belief in the underlying value of our investments is overwhelmingly intact.
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About The Author: Jim Roumell
Jim Roumell entered the securities industry in 1986. Before founding the firm in 1998, he was a Registered Principal at Raymond James Financial Services, Inc. Mr. Roumell is a frequent contributor to Manual of Ideas Global and has been featured in such publications as Barron’s, Kiplinger’s, Value Investor Insight, Financial Planning Magazine, and The Washington Post. He is listed and quoted in “The Art of Value Investing: How the World’s Best Investors Beat the Market.” Mr. Roumell was selected to participate in, and won, two consecutive Wall Street Journal stock picking contests in 2001 and 2002. He is a Board Member and Chairman of the Investment Committee of Wayne State University Foundation. He is also a Board Member and serves on the Investment Committee of Amalgamated Casualty Insurance Company. Mr. Roumell is a graduate of Wayne State University in Detroit, Michigan.
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