At Alphamont, we are risk averse investors largely due to proven statistics. The percent gain required to get back to breakeven grows exponentially, with that exponential growth really taking off at losses beyond 20%. We apply this thinking to each individual holding, knowing that if we prevent a loss from occurring on a majority of our holdings then the overall portfolio's losses will be muted.
Alphamont aims to reduce the chance that the overall portfolio experiences a drawdown by focusing on purchasing securities that have a “Margin of Safety” as termed by Seth Klarman in his book of the same name. We seek out securities that are discounted to their intrinsic value because they should be less likely to experience further declines, and those declines should be less severe than the declines of fair and over-valued securities.
Generally, Alphamont believes that if a portfolio avoids holdings with significant downside risk, then the portfolio upside will come in due time.