Celebrating Cheviot’s 35th Anniversary
Fred Marks began his professional career in the 1960s as an attorney specializing in business transactions, retirement planning, and estate planning. As one of his many intellectual pursuits, he studied investing and eventually was introduced to the concepts of famous investors, including Benjamin Graham and his most well-known student, Warren Buffett. And, as Fred carried on in the legal profession, he witnessed far too often that his clients would suffer investment losses either at the hands of careless investors or by those perpetuating nefarious schemes. Fred knew there was a better way.
In 1985, for less than a $3 ticket, one could see hit movies Back to the Future and Beverly Hills Cop while listening to “We Are the World” on the car ride to the theater. Interest rates in the United States averaged 8%, the world’s population had yet to breach five billion, and Coca-Cola introduced New Coke to great publicity – and even greater confusion. All the while, a handful of Fred’s legal clients were independently trying to convince him to assume the management of their investments. And so that year, after some persuading, Fred began to professionally manage the investments of six legal clients.
Fred’s motivation for beginning his investment firm was to provide safe, long-term growth of the investments entrusted to him. He knew that by keeping his clients out of harm’s way, he would help them reach their financial goals while also providing peace of mind throughout the journey.
One early and enduring component of his investment philosophy was to “win by not losing.” Once firmly established, Fred renamed his company Cheviot Value Management for the neighborhood within Los Angeles in which he lived (Cheviot Hills) and the type of investing espoused by Benjamin Graham and Warren Buffett.
The goals for Cheviot were and continue to be: invest safely to generate long-term portfolio growth with much less volatility than is produced by the overall stock market and provide expert financial planning services – both of which should succeed in helping our clients sleep well at night. Cheviot’s philosophy is always to focus on the long run and ignore short-term fluctuations other than to benefit from them by buying what we deem cheaply priced securities and selling richly priced ones. In order to accomplish this, we at Cheviot think independently, unafraid to disregard the current sentiment of the crowd. It is important to invest patiently, remembering Buffett’s observation that, “The stock market is a device for transferring money from the impatient to the patient.” And, borrowing lessons from Buffett’s long-time business partner, Charlie Munger, we seek to understand the many psychological pitfalls that handicap investors, trying at all times to avoid them, and having the gumption to purchase investments in difficult times and to make sales when all appears cheery.
Often, we are buyers of stocks when they are least liked and media headlines portray a business fallen on hard times. A segment on financial television in which our own Darren Pollock was interviewed was titled, “Why Darren Pollock Loves Stocks You Hate.” And would you believe that the companies at the time that were so truly out of favor that they were considered “hated” were high-quality behemoths like Berkshire Hathaway, Microsoft, and WalMart? Such is the cyclicality and often fickle nature of financial markets. While it may feel uncomfortable in the moment, going against the crowd can be rewarding over time.
Rooted in Cheviot’s desire to keep our clients’ assets safe is the notion that the investments we buy are just as important as those we avoid. Our seeking value in the shares of the companies we purchase helps steer us away from expensive and overly-popular stocks, often fads, that can easily sour on those investors who hold them. The individuals and organizations for which Cheviot works employ us because our investment style grows their wealth over time while also avoiding major market meltdowns. (Of course, past performance is no guarantee of future results. For disclosures, see page 7 of this letter.)
We take great pride in keeping our clients safe during historic periods of tumult. In these pages, Cheviot predicted the 1987 stock market crash just months before it occurred. During the dot com bust years 2000 through 2002, we actually grew our clients’ wealth when U.S. stock prices fell 45%. And Cheviot helped its clients sidestep most of the stock market’s decline during the financial crisis of 2008. True to Cheviot’s founding purpose, we have avoided devastating declines and hope to continue doing so in the future.
Over the years, Cheviot has grown to provide a comprehensive suite of financial services, all of which are included for our clients. We are proud to help clients navigate their way through an often treacherous “financial jungle.”
When asked what makes for an honest member of the financial community, former Federal Reserve Chairman Paul Volcker, considered a paragon of integrity in American finance, replied, “Do they have a fiduciary responsibility or not?” While the term “fiduciary” has a definite legal definition and is adhered to by some though not all firms in our industry, Cheviot always has maintained the fiduciary standard as not just a legal but a moral imperative.
With Cheviot’s growth has come a few small nods of recognition within the industry. Fred never imagined back in 1985 that his quiet firm would eventually be mentioned three dozen times over the past decade in The Wall Street Journal, Barron’s, Bloomberg, and Money Magazine, among others, by some of the most esteemed financial journalists in the business. It is a pleasant surprise every time the phone rings and one of these organizations is on the other end of the line.
For those who visited us when Fred was still involved in the firm’s daily activities, you might recall his desk adorned with several ornamental tortoises. Employing a calm, consistent, and methodical approach, Fred knew, with an assist from Aesop, that slow and steady wins the race. It is one of many beliefs ingrained in Cheviot’s culture. (And speaking of slow and steady, Cheviot’s two principals, Darren Pollock and David Horvitz, have been with the firm for 22 years and 14 years, respectively.)
We thank you, our valued clients, for these first 35 years. And we continue to dedicate ourselves to providing you with the highest standard of personalized wealth management during the next 35 years.