A back-to-basics approach that generates dividends and low volatility

Bob Kalman co-founded Miramar Capital, LLC in 2017, where he serves as a senior portfolio manager. He was previously founder and director of Kalman Kushnir Capital, Inc., with offices in Chicago, New York and Hong Kong.

Russ Alan Prince: Tell me about Miramar Capital and your approach to providing personalized portfolio management services and “personal CFO quality” services to your clients.

Bob Kalman: Miramar Capital is an independent firm with over 60 years of combined experience in managing investment portfolios for private clients and we always act in the best interests of our clients. We see our primary role as providing a clear and disciplined approach to investment excellence and personalized wealth management.

We manage a specific strategy which should represent the largest allocation of a family’s portfolio. But we don’t do it in a vacuum. We take a holistic approach that includes the full picture of their assets.

We also incorporate decisions that guide the direction and longevity of multigenerational wealth. For example, we are periodically asked about funding strategies for the next generation or when to pass on wealth to current and subsequent generations. If a business owner is considering an M&A situation or a family stock transfer, we will assist that owner in valuing the business, which serves as a channel of verification against external valuation firms. Clients who have or are about to have significant liquidity events need advice and access to professionals who will help them plan their estate, adopt appropriate tax strategies and make investment decisions. financial portfolio. Our goal is to ensure that everyone works together on the same page and always acts in the best interests of clients as fiduciaries.

We offer tailor-made services for our clients. We’ll even perform basic tasks, such as paying estimated federal and state taxes. As my business partner and co-founder, Max Wasserman likes to say, “We’re the captain of the ship, but the customer owns the ship. Together we choose the course and it is our job to ensure that the ship and passengers arrive at their destination safely. We consider it an honor and a privilege to serve them, and in doing so we adhere to principles that much of the industry does not. And we performed well for them.

Prince: What is so unique and different about your investment strategy that emphasizes cash flow growth in the form of dividends?

Kalman: First and foremost, we manage money in-house and use exclusively proprietary research to deliver results that help clients thrive and pursue their goals. Most growth-oriented investors don’t realize that dividends have accounted for an average of 40% of S&P returns since 1930. So our main focus is growth and dividend growth, rather than looking for companies that only pay current high dividends. To achieve this, we start with a top-down view, looking at the economy, the business cycle, and what we expect monetary policy to look like over the next 6-12 months. This analysis guides our decision as to which sectors are best suited to invest and in what weightings.

We then take a bottom-up approach in selecting individual names that meet our stringent criteria, which, in addition to dividend growth, include but are not limited to current payout ratio, balance sheet quality and equity strength/growth. cash flow. We choose names that we believe offer asymmetric return potential, which we define as up to 10% downside risk with 30% or more upside.

Our portfolio has between 29 and 34 names. Unlike many managers, the company’s two executives own all of the names in our model portfolio. We invest and assume the same risk alongside our clients.

Prince: How high net worth individuals should think about active versus passive strategies in terms of building a diversified portfolio to meet their needs in the environment, and where do you see the opportunities in the markets of today?

Kalman: Our primary focus is risk mitigation while delivering consistent and relative risk-adjusted returns. This is what drives our stock selection process. Managing a growth portfolio that delivers consistent and growing dividends and produces current cash flows allows us to target lower overall portfolio volatility, generating a current beta of 77 points. This combination generates alpha thanks to our conservative strategy. Passive investing does not offer risk mitigation, as most indexers or hidden indexers have multiple overlapping positions, regardless of their original investment strategy.

We correctly predicted that the Fed would need to raise rates and shrink its balance sheet long before many managers. In a rising interest rate environment, after historically low levels and very strong equity returns that had little or no positive cash flow, we further found that certain market sectors were grossly misjudged. We were underweight technology companies, excluding those that have no cash flow or dividends. We are now strengthening our positions in technology mega-caps and favoring the healthcare and financial sectors.

We currently own Prudential and JPMorgan, names we consider to be among the cream of the crop in the financial industry. We also own Corning Glass, which pays a 3.1% dividend. Among its products is gorilla glass used in cell phones, computer monitors and new OEM automobiles. Additionally, Corning has a partnership with Samsung, whose global market share in the cellphone market exceeds that of Apple’s iPhone.

We also like UPS, which pays a 3.4% dividend. The company increased its capital expenditures years ago to achieve best-in-class logistics technology, has pricing power and generates incredible cash flow as people move more goods through the carrier. We hold Target, paying a 1.4% dividend, as a growth story. It is strong in semi-durable and consumable goods and has a partnership with CVS, which drives traffic to each other. In the energy sector, we own Chevron, paying a dividend of 3.45%. It is an integrated oil company, with more pricing power than some of its competitors, and diversifying into renewable energy.

In fixed income securities, we invest exclusively in very high quality companies and municipalities and avoid securities that present a higher risk. In a rising rate environment, we prefer short duration bonds, given the shape of the yield curve which also helps to mitigate risk.

RUSS ALAN PRINCE is executive director of Private Wealth magazine (pw-mag.com) and chief content officer for High-Net-Worth Genius (hnwgenius.com). He consults family offices, quick-and-rich entrepreneurs and selected professionals.

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