About the Fund

Investment Objective

The Castle Focus Fund seeks long-term capital appreciation. The Fund typically invests in the common stocks of domestic companies and American Depositary Receipts (ADRs) of foreign companies of any size without regard to market capitalization. The portfolio is typically comprised of 15 to 30 positions that the Fund’s Sub-Adviser believes are trading at a substantial discount to their conservative estimate of fair value.

  • Sub-advised by St. James Investment Company
  • Concentrated All-Cap Value
  • Bottom-up stock selection
  • The fund follows the same strategy that the sub-advisor has used for its private clients since 1999

Investment Philosophy

Independent research is at the heart of the sub-advisor’s strict bottom-up value approach to selecting investments for the Fund. Businesses that meet their investment criteria are typically well-managed companies with attractive and predictable free cash flows that are trading well below the sub-advisor’s conservative estimate of intrinsic value. They believe that these types of investment opportunities are rare. Because of this scarcity the sub-advisor makes meaningful and sizable investments when these infrequent opportunities become available. This patient approach means the Fund holds a concentrated basket of the sub-advisor’s best ideas and can move differently than the market or its peers.

Our Approach

  • Buy at a Discount: Our portfolio manager uses independent research to appraise the value of a company. Investments are then ideally made at a significant discount to our conservative estimate of the company’s current intrinsic value.
  • Focused on absolute returns: We define risk as the permanent loss of capital, and thus believe that the quality of investment decisions is far more important than the quantity of investment decisions.
  • Willingness to Hold Cash: Patience is necessary in the absence of obvious bargains, as entry price is a significant determinant of return. In our experience, periods of great pessimism often generate the best investment opportunities.
  • Concentrated Portfolio: The Fund typically owns 15 to 30 equity securities.

As our view diverges from the consensus,
we find investment opportunities

We are value investors. We adhere to a strict price discipline when buying companies and we purchase shares of a business when they trade at a significant discount to what we believe is their true worth. We do this because we believe that entry price on any investment is ultimately the key driver of future returns. First, a stock trading at a discount may incorporate low investor expectations that can serve as a buffer against the risk of decline. We are guided both in what we buy and what we sell by an ongoing search for superior value, often steering clear of popular choices that come at a price we would rather not pay. Second, we believe investing when valuations are low creates greater potential for capital appreciation. We which has shown us that patience and discipline are necessary in the absence of obvious bargains. We are willing to hold cash at the expense of relative returns when we are not able to find companies trading at a substantial discount to our conservative estimate of intrinsic value. We are absolute return-oriented and employ a fundamental investment discipline when managing the Castle Focus Fund. This discipline starts with a measurement of the intrinsic value of a business in relation to the price of its shares. The higher the quality of the business in terms of financial strength, free cash flow, earnings growth and internal rate of return, the higher our view of intrinsic value and the more we find the investment attractive.

Investments are ideally made at a significant discount to our view of a company’s current intrinsic value. We strongly believe that the price paid for a company is ultimately a key driver of total return. By adhering to these principles of value investing our investment philosophy typically runs counter to the general market psychology. The buying and selling of companies is therefore based on investment discipline, not popular opinion.

Years of experience have taught us that investor perceptions of an equity security can fluctuate much more widely than underlying fundamentals. Thus we believe it is difficult, if not impossible, to predict short-term price movements. We look further out in our analysis (generally 3 to 5 years) beyond readily apparent short-term information. As our view diverges from the consensus, we find investment opportunities.

About the Subadvisor

The Castle Focus Fund is sub-advised by St. James Investment Company of Dallas, Texas. St. James was founded in 1999 by Robert Mark who started their core equity strategy that same year. Eleven years later in June 2010 Castle hired St. James as sub-advisor to the Castle Focus Fund. The Fund follows the same strategy that St. James has used for its private clients since 1999.