Carmichael Capital

Investment Strategy

Like the doctor who pledges to “do no harm,” we at Carmichael Capital believe that capital preservation is the first order of business. To that end we establish strict criteria for investments we make, we tend to move incrementally into and out of investment positions while monitoring their performance, and we use cash reserves as a safe haven in times of systemic stress.

There are many schools of investing strategies. We tend toward what is known as “value investing,” which involves searching for and investing in securities which we feel are undervalued based on a number of criteria. We believe this process helps us to invest with a margin of error which helps to mitigate loss and to enhance return. Some of the criteria that guide us in the identification of value are:

  1. statistical undervaluation in relation to cash flow or asset values
  2. the unrecognized value of business franchises
  3. improving returns on invested capital and cash flows
  4. profits generated in cash
  5. management working in the shareholders’ best interests

Among the macro-economic factors we take into consideration are the interest rate environment, Federal Reserve Board policies, systemic risk and the impact of regulation, taxation, inflation, and currency translation.

The market price of some securities can become unduly depressed due to the disfavor or misperception of institutional investors, the absence of research scrutiny by the investment community, or by forced selling by shareholders under financial stress. These depressed prices present an opportunity for those with the discipline to act only when the underlying business values are compelling. This practice diminishes the risk of buying securities which are relatively cheap only to find that the “yardstick” used to make the measurement was stretched. This is where we hope to invest with a “margin of error” that allows us to be wrong without being too badly effected.

We use absolute, not relative, criteria. Consequently, we are very specific as to the price we are willing to pay to invest in any security. The same valuation methods which determine undervaluation are used to determine when an investment is no longer undervalued and should, therefore, be sold. Investments of this type are more suitable for the long-term investor because of the inability to determine when investment popularity will return to a particular issue. Short-term price fluctuations are of secondary importance to the underlying business value of the individual security. Our patience is not infinite, however, and we consider our stocks to be employees who, if not performing properly after a time, are shown the door. We can then “hire” another when we find one who fits our criteria.

By pursuing these practices, we intend to preserve capital in adverse market conditions and to profit handsomely when conditions are more favorable. This strategy is then applied to portfolios taking into account the individual needs and desires of each client.


1. Carmichael Capital only transacts business in states where it is properly registered, or excluded or exempted from registration requirements.

2. Different types of investment involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s investment portfolio. No client or prospective client should assume that any information presented and/or made available on this Website serves as the receipt of, or a substitute for, personalized individual advice from the adviser or any other investment professional.