“We Always Do Our Homework” was the theme of FAM Funds’ 29th Annual Shareholder Informational Meetings held in October. Both sessions kicked off with Anne Putnam, Vice President of Intermediaries, welcoming everyone and opening in prayer. Anne spoke about her new role of managing a team that focuses on third parties, especially registered investment advisors. She then introduced her father, Tom Putnam, FAM Funds’ Founder & Chairman.
Tom showcased some of the homework our Investment Research Team conducts. He pulled out three key books from his backpack that have shaped the way our research analysts examine companies, view the stock market, and invest. These books are: Security Analysis, Value Investing, and The Intelligent Investor. Tom stated, “I dare say that if you have read these three books, then there is not much more you need to know about investing.”
Next, Tom gave an exciting announcement concerning John Fox. John joined the firm as an analyst in 1996, was appointed Co-Manager of the FAM Value Fund in 2000, and eventually became the Director of Research. Tom said, “Throughout his tenure, John has provided a supreme intellect that does not muddle a gentle, common sense approach to investing. John’s ability to demonstrate independent thinking has added a refinement to our investment process. He has the ability to communicate his ideas to investors, professional investment advisors, and our research analysts in candid, clear, and concise terms. Based on these characteristics, John has been appointed Chief Investment Officer.”
Tom continued, “After 41 years in business, and due to our entire team, our investors have never been in better hands. We are excited about our ability to serve you in the future and execute our philosophy for years to come.” Tom emphasized that he will remain as CEO and continue to be involved in the investment research process.
John then took to the podium and spoke about how we do our homework. Many of our shareholders have asked us how we select the quality stocks in our Funds. John explained, first we do a lot of reading. For each of our new ideas we read annual reports, investor presentations, proxy statements, and much more. If we like what we read, then we speak with management on the phone — this amounts to about 50 conversations annually. If our analyst likes what they hear during their management call, they write an in-depth “Green Sheet” report which describes the merits of why they find the stock attractive. Next, the Research Team meets, often more than once, to discuss the Green Sheet in great detail.
If the team likes the proposed idea, then we must estimate the stock’s buy price. John stated, “This is an extremely important step because if we pay too much for the stock, then we may not make any money on our investment even though it is a quality company.” Once a buy price is agreed upon, we wait for the stock to trade at that valuation. If it does, we purchase it for one or more of our mutual funds. The final step is a management visit. Subsequently, our goal is to meet with management at least once a year to audit the investment. Over the course of a year we will reach all corners of America as we meet with our holdings.