Frequently Asked Questions

How do you decide exactly what to buy? Who Decides?
Our investment committee consists of Paul Orfalea, Lance Helfert and Atticus Lowe, and they make the final decisions regarding investments. We narrow our choices through selection criteria that include fundamental analysis of a company's industry, business model, leadership, competitive advantage, and other factors. Opportunity exists in the gap between a company's intrinsic value and the market's ever-changing perception of the company's value, so when we believe the time is right, we buy or sell. Back to Top

How involved is Paul Orfalea?
Although Paul Orfalea does not engage in the day-to-day administrative duties of the business, he is actively engaged as a member of the investment committee, participating in the stock selection decision process. Back to Top

What is your minimum investment?
Requiring a $1,000,000 minimum investment allows us to devote more focus to our clients and our intensive research. Back to Top

Are you a mutual fund?
No. We manage separate accounts for high net worth individuals, institutions and foundations. Unlike a mutual fund, our clients own the individual stocks we choose, and also benefit from tax-efficient management. Back to Top

Are you a hedge fund?
No. West Coast Asset Management manages separate accounts for high net worth individuals, institutions and foundations. WCAM also manages the West Coast Opportunity Fund, an alternative investment vehicle for qualified investors. Back to Top

How much do you charge? Does that include commissions?
We are not compensated by commissions, and we do not accept "soft dollars" from our service providers. Our separate account management fee is 1.5% of assets under management, billed quarterly in advance. We leverage our size and strong relationships to ensure low commission rates for our clients. Note that our performance figures are net of all fees. Back to Top

Does every client own exactly the same stocks?
We manage all accounts with discretion, and the strength of our conviction in our investment philosophy leads most accounts to hold the same concentrated portfolio of stocks. Back to Top

What is your process for discovering and buying/selling stocks?
Every WCAM coworker is on the lookout for opportunity, and understands the three key areas of research: the business, the people, and the price.

The Business	The People	The Price
Is it understandable?	Are they shareholder-oriented?	How does potential reward compare to risks?
Does it have competitive advantage?	Have they demonstrated competence in allocating capital?	What is the margin of safety?
Does it have recurring revenues?	Do they understand and manage the company culture?	How big is the discount to intrinsic value?
How well does it manage the product life cycle?	Is there a high level of insider ownership?	What is the current liquidation value?
How will demographic shifts affect this company?	Are they skilled operators of their business?	How does it compare to others in the industry?

Companies that meet our criteria are recommended to the investment committee, which initiates further research and ultimately decides yea or nay.Back to Top

How do you decide when to sell a stock?
We agree with Philip Fisher's rationale for selling, from his 1958 classic, Common Stocks, Uncommon Profits. Fisher's reasons to sell are: When it becomes clear that the original rationale for purchasing was flawed. When a company no longer qualifies as a top performer. When there is a better place to put your money. We also sell when the tax advantages outweigh the advantages of holding a particular security.Back to Top

How do your results compare with other boutique money managers?
We typically compare our performance to that of the S&P 500 index because it is publicly available, well understood, and represents the overall stock market. Charts of our performance, updated quarterly, can be viewed elsewhere on this website. We are particularly proud of our upside/downside ratio, because anyone can make money when the market is on a bull run, but it takes an entrepreneurial investor to limit losses when the entire market is sinking.Back to Top

Your performance results refer to a composite. What is this composite?
Although WCAM manages a range of accounts, the "equity composite" represents the combined performance of equity accounts over $100,000 in value. (Our minimum investment per client is $1,000,000, but some clients maintain multiple accounts, like IRAs, trusts, etc.). The composite provides a way to compare the performance of our separately managed accounts to other types of investments, such as mutual funds. We believe that prospective investors should compare performance net of all fees.Back to Top

I don't have $1 million now, but I will after a couple of events. Can I start with less?
We are happy to review such requests on a case-by-case basis.Back to Top

I have far less than $1M, but want to invest. How should I start?
We believe that all investors should be informed investors, and happily recommend the following resources for furthering one's financial education:
One Up on Wall Street by Peter Lynch
Annual shareholder letters by Warren Buffett
The Intelligent Investor by Benjamin Graham
The Warren Buffett Portfolio by Robert Hagstrom
West Coast Asset Management's Exclusive Outlook Newsletter
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With market volatility, what is an appropriate time horizon for making money?
The entrepreneurial investment philosophy is best-suited to patient investors with a long-term perspective.Back to Top

Investment Philosophy

Why do you own so few stocks?
We believe that a concentrated portfolio is the best strategy for increasing capital and minimizing risk. This allows us to thoroughly understand every company we own, and allows each selection to significantly affect performance.Back to Top

How much of your AUM are your own assets?
As of mid 2006, approximately half of our assets under management represent funds of our principals and co-workers.Back to Top

Do you invest in value or growth stocks?
We do not discriminate against companies based on such labels. In fact, we view so-called "style boxes" as mere marketing gimmicks for the financial services industry. Our investment style is opportunistic, so we invest in companies we believe provide the greatest chance of capital appreciation, regardless of their size, sector or style. As WCAM's Chief Investment Officer Atticus Lowe says, "Every company we invest in is a good value, and growth can be a major component of value."Back to Top

Why are you sometimes so heavily invested in oil and gas?
We do not limit ourselves to specific sectors or styles, so we are free to take advantage of price inefficiencies wherever we find them. The oil and gas companies in our portfolio at any given time are simply companies that seemed to offer valuable assets at a bargain price, with the possibility of a catalytic event that would boost the value of the investment. We do feel that the increasing demand for oil and gas continues to make companies with proven reserves good investments, presuming they can be purchased at the right price. That said, we periodically readjust our positions vis a vis oil and gas, depending on market conditions.Back to Top

Will you maintain concentration as you grow?
Yes. Concentration is a cornerstone of our investment philosophy.Back to Top

Will managing more assets be detrimental to your investment style and historical success?
Like all registered investment advisors, we must point out that past performance is no guarantee of future success. Naturally, maintaining a concentrated portfolio becomes more problematic at some level, because large investments in smaller companies could compromise our liquidity, while investments in larger companies might compromise our returns. Nevertheless, we believe our investment philosophy applies equally well to any level of assets under management.Back to Top

What are your return goals?
We do not set a numerical goal for average returns. Rather, we always seek to produce the greatest returns possible within the acceptable range of risk for our clients. Like many investment advisors, we measure our performance against the S&P 500 index.Back to Top

Do you have any limitations as far as sector or company diversification?
Our only limitation is the range of our own expertise: we only invest in companies we can thoroughly understand. To ensure adequate diversification in our concentrated portfolio, we usually will not allocate more than 15% of our assets to a single stock, or more than 30% to a single sector. In the event of outstanding bargains, however, we may exceed these guidelines.Back to Top

What is the biggest position you would take in one stock?
Opportunistic as we are, we must weigh such decisions against liquidity and unsystematic risk concerns. Each opportunity must be studied on a case-by-case basis.Back to Top

Do you visit companies?
We often visit prospective or portfolio companies. We firmly believe in hands-on research, including the opportunity to interview a company's co-workers in the field. We want to see with our own eyes the company culture, state of equipment, evidence of waste (fancy furniture for an office no one visits?), etc. We also make a point of experiencing a company's products in the field when possible; for example, we visit stores that sell a company's products, or talk to doctors who might prescribe a company's drugs.Back to Top

How does Paul's experience influence WCAM?
As a co-founder, Paul Orfalea's entrepreneurial, investing and teaching experience influences the culture of West Coast Asset Management. Many of us have worked with him for many years, and our combined business experience helps us evaluate the leadership of prospective investments.Back to Top

Are you socially responsible investors?
Although there may appear to be a conflict between our opportunistic style and the concerns of people seeking socially responsible investments, we find a frequent relationship between well-managed companies and social responsibility. Companies such as Johnson & Johnson, which has long been one of our favorites, maintain a credo declaring their commitment to customers, co-workers, communities and shareholders. While we do not exclude any company from consideration, socially responsible companies seem more likely to make the final cut. Back to Top