ENSEMBLE OFFERS INVESTMENT MANAGEMENT
OF CUSTOM-BUILT PORTFOLIOS.

WE INVEST IN INDIVIDUAL STOCKS AND BONDS
BASED ON OUR INDEPENDENT, OBJECTIVE RESEARCH.

We manage portfolios on behalf of...
  • families
  • trusts
  • foundations
  • nonprofits
Investment Philosophy

We use a COMMON-SENSE APPROACH to discovering INTRINSICALLY
VALUABLE COMPANIES.

We believe that investors are best served by owning a portfolio of companies, both emerging and established, that have significant growth opportunities and competitive advantages that allow them to sustain their profitability while returning capital to shareholders over time. Rather than trying to guess which way the market or certain stocks may move in reaction to short-term news, we look to participate in the profitability of companies that will achieve superior long-term corporate performance.

We are business analysts, not stock market pundits. We spend our time learning as much as possible about the industry trends, competitive dynamics and customer demands that give rise to intrinsically valuable companies. Many investors, on the other hand, are nothing more than stock market speculators, analyzing the stock market instead of the actual companies in which they invest. While it is seductive to think that an investor can guess which way the market will turn, sustainable returns are generated through investing capital based on extensive analysis of the specific businesses in which you take a position.

Case Study

Ensemble can help manage your assets to
COUNTERBALANCE POSITIONS HELD ELSEWHERE.

Michael oversees a significant base of assets on behalf of his extended family. He makes asset allocation and long-term planning decisions himself and places his family’s capital with various investment managers that demonstrate superior results within their area of focus.

Michael hired Ensemble Capital to manage his allocation to U.S. equities. Ensemble’s approach to equity management allows our clients to participate across the typical value vs. growth categories and regardless of whether small, medium or large capitalization stocks offer the best investment opportunities. Michael’s interest is in achieving the strongest possible long-term investment returns while minimizing risk. Ensemble Capital’s approach of building a focused portfolio of superior companies trading at reasonable valuations was a good fit for Michael’s long-term approach to investing.

Stock Selection

ENSEMBLE PERFORMS DEEP, ORIGINAL RESEARCH
TO IDENTIFY COMPANIES WE BELIEVE WILL PRODUCE
STRONG RESULTS WITH LIMITED RISK.

Stock Selection | How We Pick Stocks

We CAREFULLY CONSTRUCT CUSTOMIZED PORTFOLIOS of these
companies on behalf of each client.

Original in-house research is at the heart of our investment process. We look for companies that have superior competitive positioning and create real cash earnings on behalf of shareholders at a higher than average rate. These companies achieve above-average returns on the capital they invest into their businesses while growing at sustainable and attractive levels.

  • return on invested capital
  • ability to grow

We understand that any potential investment is far more than a blip on a stock screen; it’s a business. And, ultimately, businesses exist to create value for their owners. To this end, we focus on finding attractive businesses that deliver real and sustainable shareholder value. We believe return on invested capital (ROIC) – that is, the realized cash return on each dollar invested in the business – is the key metric to determine the value-creating ability of any company. We focus on companies that generate high or improving ROIC, as those businesses, all else equal, deliver the greatest shareholder value.

Stock Selection | Expectations Matter

Even the most attractive business does not have unlimited value. Frequently, the market will have excessively optimistic or pessimistic expectations about a company’s prospects, which are often reflected in stock valuations. Our objective is to identify companies with outstanding profitability and growth characteristics, at times when the market does not fully appreciate them.

We always seek to pay a compelling price for the businesses in which we invest. A fundamental element of our research process is estimating what a potential investment is worth — that is, its intrinsic value. Alongside our company due diligence, we use several methods to derive that estimate. We consider traditional valuation metrics, but we also generate an informed estimate of the economic profits a company can deliver now and into the future. We only invest client capital in companies which trade at a meaningful discount to our intrinsic value estimate, taking great care not to assume that every great company is also a great investment opportunity.

Portfolio Management

INTELLIGENCE IS KNOWING.
WISDOM IS KNOWING WHAT TO DO.

Portfolio Management | How We Manage Portfolios

The portfolio management process is a critical aspect of RISK CONTROL.

We believe that there are two key elements of successful portfolio management that are not practiced by the majority of investors. While it is possible to be successful without abiding by these guidelines, not sticking with them makes superior performance much more difficult to achieve.

Portfolio Management | The True Cost of Diversification

Investment diversification has a SWEET SPOT. Too much can be
costly — and too little can be much worse.

Over the years, the financial services industry has broadly accepted and promoted the mistaken idea that more diversification is always better. Both academic and real world studies show that for a portfolio of stocks, the risk reduction benefits of additional diversification is minimal beyond 20 to 30 positions. In addition, the cost of diversification beyond this point outweighs the potential benefits — adding a 50th or 100th position to a portfolio requires adding an investor’s 50th or 100th best idea.

At Ensemble, we invest our clients’ equity assets in 20-25 stocks. This degree of focus provides the benefits of diversification while keeping our clients’ assets in our best ideas. With this level of focus, we are able to know every company in our portfolio inside and out.

PARETO'S DIVERSIFICATION
  • Universe of public domestic stocks (NYSE and Nasdaq) 6,000
  • Universe of S&P 500 index 500
  • Typical actively managed equity mutual fund portfolio 200
  • Optimally diversified portfolio 25
Like the Pareto principle (the majority of the beneficial effect arises from the minority of the causes), Ensemble invests in highly-focused, customized client portfolios of 20 to 25 positions. Selected by our own proprietary research, we believe these positions offer the greatest potential for market performance, as supported by academic research, real-world studies, and our own firm's superior performance over the last 15 years.
Portfolio Management | Investing vs. Trading

We focus on making MULTIYEAR INVESTMENTS in companies we
think will thrive over the LONG TERM.

Our analysis focuses on the positive and negative developments that are likely to play out over the next 3 to 5 years or longer. Because we seek to benefit from superior long-term corporate performance in excess of market expectations, our holding period is designed to match the multiyear period over which corporate performance unfolds.

Our clients care primarily about the long term performance of their assets and our investment analysis is focused on meeting those long term goals. The majority of investors instead focus myopically on the positive and negative developments that are likely to occur in just the next couple of quarters. This short term focus leads investors to pay high prices for what’s hot now or sell at low prices in the face of transitory difficulties.

  • 36-60 monthsEnsemble average holding time
  • VS
  • 11 monthsWall Street average holding time
Portfolio Management | Fixed Income

Over long time periods, we believe that stocks will deliver
SUPERIOR INVESTMENT RETURNS compared to bonds and cash.

The price of stocks' long-term outperformance is short-term volatility. Therefore, when clients have short- to medium-term needs for their assets or simply wish to avoid some of the volatility inherent in stocks, we add bonds and cash equivalents to their portfolios.

Rather than seek to take undue risk in this portion of client portfolios in search of slightly higher returns, we focus on building very high-quality portfolios of bonds that we believe fairly compensate investors in light of their reduced level of risk. Our primary concern in fixed income investing is credit risk — that is, the risk the bond issuer will not deliver on its obligation to make timely interest and principal payments. We focus on issuers’ financial health, analyzing their cash flows, leverage and liquidity – but also their operating histories and management strength. In this sense, our bond analysis is not that dissimilar from key elements of our stock analysis – and we perform this research regardless of whether the issuer is a corporation, municipality or other borrower.

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