In 2004, a Harvard Business Review article argued that ambidextrous leadership was crucial to long-term business success. Ambidextrous was defined as a business that exploited existing market opportunities, displayed operational excellence, and mandated executional efficiency. Simultaneously, the company must explore new markets, products and services, and customers. Failing to do either, the article argued, could lead to a company's demise. Think Blockbuster, Polaroid, and Kodak as examples of masters of their universe who failed to explore a changing environment. Contrast them to the flamed-out “good ideas” of the dotcom era that never executed operational efficiency.
Investors would be wise to emulate the same concept in their investments. The concept, however, is easier to grasp than actually apply. Companies historically have displayed greater prowess in adapting and expanding or maximizing the current landscape.
A premise of owning the market indices is that you own a blend of both. Value-oriented companies tend to pay dividends and are thought to reflect a fair current valuation via their stock price. Growth-oriented companies tend to reinvest access cash in future opportunities, and the current stock price reflects measured success within those strategies. An investor could appear ambidextrous by owning both value and growth-oriented companies.
As a professional money manager, I would argue a strategy of searching out companies that are individually ambidextrous in nature, not a portfolio of companies that focus on one or the other.
Free advice often reflects the value of the price paid. There is no shortage of people, blogs, and videos offering sage wisdom for free – this column included. Take what is offered, and see if you can sharpen your strategy or improve your results. Don’t take any guidance and run without contemplation of where you are now and, more importantly, where you want to go before altering your investment behavior.
When we opened the doors at the Financial Enhancement Group in 1997, our key differentiator was controlling taxes and reducing internal investing costs by electing never to use mutual funds. We were laughed at by academics, scoffed at by our competitors, and counseled by many to “dance with who brings ya.” Twenty-five years later, the mutual fund industry remains the largest pool of investable assets but loses market share to their more tax-efficient and lower-cost exchange-traded fund (ETF) competitors every year.
We are proud at FEG that we held firmly to our beliefs and embraced what was considered a new frontier of investing. As the managing partner, I have no regrets on following a path I felt was in the best interest of the families we served and the 1,123 families we serve today.
An onlooker could rightfully argue we would have been more profitable to abide by industry standards of using mutual funds and slowly moving to new investment vehicles. The criticism is sound from a business perspective, but I am glad we stuck to our guns. As a business owner, that is my choice. You should consider what is right for your portfolio.
Financial Enhancement Group is an SEC Registered Investment Advisor. Securities offered through World Equity Group, Inc. Member FINRA/SIPC. Advisory services can be provided by Financial Enhancement Group (FEG) or World Equity Group. FEG and World Equity Group are separately owned and operated.