TWST: Could you just give us a brief description of Sanco Services and your responsibilities there?
Mr. Selengut:Sanco Services is a small and private (unaffiliated with any Wall Street firm) Investment Management firm. I own the company and manage roughly $30 million for 70-75 clients. I only invest in individual equity securities, no open end Mutual Funds of any kind. Fixed income securities include individual preferred stocks, corporate bond unit trusts, closed end municipal bond funds, Government securities, etc. Every account is different from every other. Each client account has its own set of goals and objectives, and its own asset allocation; no two accounts are identical, although many will own the same issues.
For equity investments, I deal exclusively with New York Stock Exchange companies that are B+ or better rated by Standard & Poor’s (investment grade), held by major institutions, and dividend paying. Those are the quality guidelines and they never vary. Client requests to do other things are discussed and rejected nearly 100% of the time. Every portfolio is diversified; no equity (or fixed income) position will exceed 5% of the portfolio assets.
TWST:What are the specific characteristics that you look for in potential investments?
Mr. Selengut:They are quality, as measured by S&P, their ability to pay their debts, their profitability, and the fact that they pay a dividend. And that’s pretty much it. If they meet the selection criteria to get into what I call the "Selection Universe"(i.e., the list of stocks that I choose from), I then look for their price movement to determine when I’m going to buy them. I only buy stocks that are down from their 12-month highs. They must be down at least 20% before I’ll even look at them, and at that point I create a list of 10 that I feel are the "best buys" for me that day.
Now what dete
rmines the best buy for me at 6:00 AM is a little bit unusual, totally not mainstream. I’m not interested in a "story", or "news", or someone’s opinion of management. No creative research or technical analysis either. It’s not any of these popular Wall Street "givens" that people use for their more educated guesswork! A stock is a "best buy" for me if I’ve been able to turn it over rapidly in the past with an acceptable profit. I’m looking to, like I said; buy a stock that’s down at least 20% from its high, with the intention of selling it as soon as I can net 10%. No buts, no outside opinions, and no greed allowed! So, in nearly any market environment, I’ll be buying and selling the same stocks over and over again. I’ll be taking profits when other people are just starting to feel comfortable about getting back into the market, and I’ll be buying when they panic or react to temporary bad news on one of "my" companies.
Just over the past week or ten days, for example, I was in and out of Chubb for a quick 10% profit. The same was true with Nucor, Exxon-Mobil and Nike recently. But this is going on all the time. "Instant Winners" are so much fun, but you’ll never do it if you get bogged down in research, timing, and analysis of any kind. Disciplined decision making is the key element for success in the market.
