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Process


Idea Generation

A long-term and often contrarian viewpoint.

The Alchemist Fund’s investments typically fall into one of three categories:
  1. great businesses purchased at attractive prices;
  2. good businesses purchased at bargain prices; and
  3. special situations. 
We generate ideas from extensive reading, screening, and personal communication with our clients and other professionals.  These ideas are carefully appraised within the framework of knowledge we have built over two decades in the profession.

Bottom-up Research

We stick to the principles.

At the Alchemist Fund, we approach each potential investment in the same manner we would approach purchasing a company in its entirety. 
We focus on:
  1. the quality of the business,
  2. our ability to evaluate its long-term economic prospects,
  3. the caliber of management, and
  4. the price offered. 
We perform comprehensive financial analysis and due diligence of each potential investment, seeking out all relevant information to best appraise the value and risks of each business we consider.

Portfolio Construction

Highly focused.

We maintain a focused portfolio of securities, typically ten or fewer core positions, that provide economic diversification, trade at a significant discount to our assessment of intrinsic worth, and that we believe have a high probability of generating well-above-average returns with a modest risk of permanent loss. 
Our level of investment is determined by:
  1. the certainty we feel about the company’s prospects,
  2. the certainty which we can trust management to act in the long-term interests of shareholders,
  3. and the margin of safety we obtain in the purchase price.  

Pros & Cons Of A Focus Strategy 

Things to consider before investing.

Volatility

Focus strategies are bumpy. 
A broadly diversified fund acts to smooth out the impact of price swings of individual securities.  A smooth ride is a relativley flat ride and typically yields below-average results. 
The Alchemist Fund seeks above-average results and our investors should be comfortable with a potentially bumpy ride.

 

Potential For Periods Of Underperformance

Highly successful focus investors including John Maynard Keynes, Charlie Munger, and Bill Ruane all endured periods of somtimes staggering underperformance.  Warren Buffett endured relative underperformance during the tech-stock bubble.  
To invest in a focus strategy, it's best if you are comfortable with a long-term orientation.  

 

We May Hold Significant Cash

A large cash position acts like an anchor when markets are rising but is a tremendous advantage when markets fall. 
We may hold a considerable cash position when valuations are high or in the absence of opportunities possessing a high probability of generating above-average returns with a modest risk of permanent loss.  This will act as a drag on performance during bull markets.
We invite you to read our ADV brochure filed with the SEC for a more complete description of the risks associated with investing.  You may access a copy here.

Advantages Of The Alchemist Fund

Advantages Over Other Funds

Your Manager Is Invested Alongside You

If every manager was required to place all or a majority of their own wealth in the very funds they manage, we suspect performance wouldn't suffer for it. 
The principal and manager of The Alchemist Fund invests his family’s capital alongside yours.  We believe there is no better place to invest than The Alchemist Fund.

 

Low Frictional Costs

The Alchemist Fund pays for every trade in your account. When we make a decision to buy or sell a security, our Client's do not incur any cost. If every fund paid for its trades, we suspect there would be a lot less trading and a lot more patience.

 

Choice Of Fee Structure

We are able to offer qualified investors a choice of fee structures that best align the interests of the client with The Alchemist Fund’s long-term orientation and investment objectives.

 

Perspective

We view stocks for what they are: passive ownership of a business.  We treat each investment in common stock as if we were purchasing the entire business.  We believe our location in Vermont helps us cultivate an independent mindset and avoid the herd mentality common in the financial centers.

 

Opportunistic

We can invest across asset classes, geographies, and in businesses large and small, many of which fall beneath Wall Street’s radar.

 

Time Horizon

We look at business through a longer lens than our peers, allowing the markets to serve us, rather than succumbing to the short-term, speculative mindset many professionals succumb to.

 

Only The Best

Our disciplined focus strategy allows us to be highly selective.  To make it into The Alchemist Fund, an investment must go through rigorous and thorough analysis. 
We invest only in our best ideas.  When investments fail to meet our hurdles, we wait until we discover ideas that do.

 

What We Do Not Do

The Alchemist Fund:
  1. does not use leverage,
  2. does not short securities,
  3. does not invest in complex derivatives, and
  4. does not own difficult to price securities.  
We believe success arises from simplicity and a steadfast intention to serve the greatest good for all involved.

 

Full Transparency

Clients enjoy complete transparency and unrestricted online access to their portfolios at all times. 
We request that client’s keep the investment selection of The Alchemist Fund confidential.

 

Access

We advise you to invest in The Alchemist Fund with funds that can be committed for at least five years.  However, should you require access to your capital for any reason, you may withdraw any or all of your capital with us at any time with no penalties.