Some milestones bring a sense of gratitude and reflection. This is true for me today – Lunt Capital Management, Inc. officially celebrates its 20th anniversary. Warren Buffett famously said, 'Someone's sitting in the shade today because someone planted a tree a long time ago.' While enjoying some of the shade today, it is worth reflecting on the initial planting. The genesis of Lunt Capital goes back further than its official founding on January 9, 2003. The seed was planted in 1997 during graduate school at New York University. I had a Dow Jones terminal wired into our New York City apartment, started building quantitative investment models, and gathered some family money to manage. The confidence of my wife and parents made all the difference, and this instilled trust and stewardship as the foundation principles in our money management DNA.
This seed continued to sprout after returning home to Utah to help manage our family office. I joined with Ryan Hessenthaler, my childhood friend, to continue building investment strategies. We started trading some of the very first ETFs, and we added some additional capital from family and friends as the years progressed. The seed had become a healthy, young tree by the time regulation required registration as an investment advisor in 2003. By that time, we thought we had experienced plenty of investment victories and scars to last a lifetime, including the dotcom bubble and bust, the September 11th attacks, and an extended bear market. It turns out that a lifetime of dramatic market events seems to happen every few years!
The Lunt Capital tree would have withered away years ago without the kindness, support, and trust from amazing family, friends, clients, partners, and employees. There have been countless lessons learned over the years about people, investment strategies, markets, the economy, investment products, and businesses. There are many more chapters to be written on these topics, but I'll mention five lessons learned in our first twenty years:
People Make All the Difference. Many have said this over the years, but it has certainly been true for us. Lunt Capital has benefited from relationships of trust of every depth and variety – including family members, employees, clients, industry professionals, partners, and vendors. We have observed that people who are steady, dependable, and full of integrity are able to weather the inevitable storms of markets, business, and life. We admire the many people we associate with who add value in all their interactions. Money is simply a magnifier of our existing characteristics, and we honor those during our history that did much for us before we could do much for them.
Every Dollar Has a Story. We have used this as a tagline for many years because it captures the essence of being a steward of capital. We recognize the vision, work, and sacrifice of every dollar that arrives for us to manage. We also acknowledge what each dollar ultimately represents for the future of an individual or family. The first dollars managed by Lunt Capital were family dollars – it was natural and unquestioned we would act in the best interests of others as fiduciaries. Understanding the story behind each dollar has inspired us to continue to commit our best thinking and best efforts.
There is No Substitute for (Home) Work. There has always been tremendous noise around the world of investing, but it has reached an almost deafening level. There is so much information available that it would be easy to drown in a sea of contradictory opinions. Twenty years ago, access to information was key to success. Twenty years later, it is the ability tune out the noise and properly interpret information that breeds success. It requires work to learn history, which gives a framework to understand what never changes and what always is changing. Homework produces both conviction in ideas and a humility to be constantly learning. The joyous, daily grind of investing requires hard work – there is no substitute.
A Willingness to Be Uncomfortable is a Competitive Advantage. More than two and half decades of investing has taught me that feeling consistently comfortable in the short-term often corresponds with less optimal long-term results. A willingness to challenge the conventional view, to have respectful but difficult conversations, and to try and see things the consensus view ignores is challenging to sustain but are the ingredients necessary to progress and innovate. Ultimately, outperformance requires a willingness to look different. Independence, commitment, resiliency, and focus are often uncomfortable. From our experience, a thoughtful investment framework enables the courage it takes to avoid destructive behavioral mistakes that plague many investors.
Making Decisions with a Long-Term Perspective is Valuable and Rare. The phrase 'long-term investing' is constantly used, but it is stunning that there are so few people or institutions that actually behave like long-term investors! Long-term does not suggest investors put their heads in the sand, ignoring new information. Adaptability is essential to surviving for the long-term! We have long referred to investing as an 'Investment Trek.' This recognizes investing is a long, arduous journey requiring vision, patience, and staying power. The trail is littered with many willing to settle for the quick win or willing to make the comfortable, short-term decision.
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