A passion for investing
When Sears Holdings Corp. stock took its investors on a roller-coaster ride earlier this year, Brian Boyle cinched up his seat belt and doubled his stake in the company after the share price plunged. His confidence in the company's future was rewarded by a rebound, and he remains a believer in the company's turnaround efforts.
Boyle launched Boyle Capital Management LLC in July 2004 after building a track record as an investment portfolio manager with DeWaay Capital Management. For Boyle, maintaining a small portfolio of carefully chosen stocks, though a path few advisers take in a mutual-fund-driven world, is one he believes will lead to long-term success for himself and his clients. Investors in Boyle Capital, which has a minimum investment of $100,000, are not buying shares in a mutual fund; their money is invested proportionally in each of the stocks held by the portfolio.
"I've always had a passion for investing," said Boyle, who said he's read The Wall Street Journal since he was in high school. "When I went to [the University of Northern Iowa], I knew what I wanted to do, which was investing." He graduated summa cum laude with a degree in finance in 2000, and has since earned a Chartered Financial Analyst designation. "In my free time, I've always focused on reading reports," he said. "That's the biggest thing to being successful as an investor; you just have to read a lot."
Year to date, Boyle's portfolio has produced a return of 13.8 percent net of fees, in comparison with a 5.3 percent return by the Standard & Poor's 500 index. Last year, the portfolio returned 9.15 percent, compared with 4.9 percent for the S&P 500.
Boyle said he benchmarks his firm's performance against several dozen private investment firms around the country. Based on those comparisons, Boyle Capital would be in the top quartile of all domestic equity managers ranked by Informa Investment Solutions' PSN database for the 12 months ending June 30, and in the top 5 percent of mid-cap blend stock portfolios.
Boyle Capital maintains a subadvisory relationship with about a half-dozen Greater Des Moines investment firms, among them DeWaay Capital Management, where Boyle leases office space.
"An investment adviser who has a client with $1 million to invest will look at putting them into several different strategies," Boyle said. "One of the things they may take a look at is putting them into a portfolio of stocks like I manage. So they might bring me in for $250,000 of that, and we would split the fees on that."
After adding his life savings to investments from family members and friends, Boyle started out with a portfolio of about $10 million. The portfolio, currently made up of just 10 companies, has grown through referrals and now stands at about $30 million, according to Boyle.
His investors are people who don't want to spend time managing their money, he said. Rather, they want results, and to know the person managing their money has the same interests they do. For that reason, Boyle keeps his entire net worth, apart from his house and some cash, invested in his company's stock portfolio. "When we make a move in our portfolio, no one has more of a stake in it than myself," he said.
Boyle, who follows an investment philosophy that runs counter to the traditional wisdom of minimizing risk through a large, diversified portfolio, is guided by principles used by Warren Buffett as well as the wisdom of investment gurus Benjamin Graham and Philip Fisher. Consequently, he buys only companies he understands well, at prices that provide a "margin of safety."
"Even a good company can be a bad investment at the wrong price," Boyle said. "If we can buy in at about a 50 to 60 percent discount of what we think a company is worth, and sell it at about 90 percent of what it's worth, we'll do that all day long. We're not going to get greedy and try to hold on for the last 10 percent, because that's where you take your risks."
Among Boyle Capital's largest holdings are Sears Holdings and Buffett's Berkshire Hathaway Inc. The firm also favors investments in media, with positions in Comcast Corp. and EchoStar Communications Corp., and in natural resource companies. Boyle's most recent purchase is Canadian Natural Resources Ltd., a company he believes is poised for a turnaround due to high oil prices and its wealth of proven oil reserves.
"We look at everything; we go wherever value is," he said. "In terms of a rigid process for identifying ideas, we really don't have one. A lot of our ideas seem to be grapevine ideas. We'll look at a stock, which will lead us to another one we're interested in. On an average day I'll probably look at three companies. I'll pull out a report, take a look at it, and I can tell probably within 10 minutes whether or not it's in my circle of knowledge. If I don't feel comfortable understanding it, I'll just discard it and put it in my 'too hard' bin and move on."
Boyle is sanguine about the cable and satellite television companies he's invested in, which he believes will prevail in their competitive battle with telephone companies for market share.
"Cable companies' stocks haven't done well as a result of capital spending on their fiber networks," he said. "But now they're at a point in their business cycle where that capital spending is gone and they're starting to kick off a ton of free cash. The market hasn't rewarded that yet because they think the phone companies are going to come in and steal market share. I don't see it happening," he said, because the telephone companies would have to match those investments in trying to enter a market that's already firmly held by the cable and satellite companies.
Boyle also used his research abilities to determine the best way to set up his own company.
"I have files of about 100 companies from throughout the country that I took a look at in trying to get a feel for how they did things and the approach they took and why they did what they did," he said. Additionally, "I'm constantly on the phone with other managers that aren't really in our marketplace who I can bounce ideas off of."
One of the key lessons Boyle learned from successful investment managers was to outsource peripheral business tasks so he can focus on research and managing the portfolio. It's also enabled him to handle the business alone at this point, though he plans to hire additional advisers as the firm's assets grow.
"The thing that's going to drive the success of any investment firm over the long run is how they do for their clients," he said. "If you're spending your time dealing with accounting issues, or compliance or technology, you're taking time away from research you could be doing or talking with other companies. You may not make as much in the near term doing that, but in the long term you're better off."