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My financial advisor ,UBS, has recommended putting a portion of my money with Northcoast Asset Management's Can Slim program. It would be about 20% of my assets with them. What is your thoughts on this strategy?

May 01, 2013 by Steve from North Huntingdon, PA in  |  Flag
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10 votes

Before I would invest in any alternative strategy, I would ask the following questions:

1) Does the manager have a longer term track record. I prefer at least a five year history, if not longer. Ask for their monthly returns. 2) What are the assets under management tracking a strategy? I prefer to see at least a couple of hundred million before I would invest. 3) Has the strategy beaten simple benchmarks after all costs are accounted for? 4) What is the turnover of the strategy and does that generate taxable events? 5) What is the source of excess returns? I would ask for a total return attribution to understand the sources of Alpha. 6) What is the team running the strategy and has there been turnover within the team? 7) How does allocating 20% to this strategy improve the risk-adjusted returns of your overall portfolio? 8) How is your advisor getting compensated for recommending this allocation for your portfolio?

I am aware of the CanSLIM program run by IBD. I have heard anecdotally about their success but have never seen any long term historical data to do any analysis. Hope that asking the above questions will help you get more insight before you pull the trigger.

Comment   |  Flag   |  May 01, 2013 from Appleton, WI

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Steve- Prateek gave you some great questions. I would also ask 1) How does this investment style fit with other investments in your portfolio. I would look to make sure that there is a not a lot overlap between the CANSLIM approach and your existing funds. The CANSLIM approach can tend to be concentrated in the number of stocks they own. 2) Is the track record they are providing real money or just a hypothetical model? I would place less weight on a hypothetical track record. 3) Lastly, I would emphasize Prateek’s point that you should understand how your advisor is compensated for recommending this investment.

Comment   |  Flag   |  May 01, 2013 from Leawood, KS

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Steve,

We cannot make a recommendation without knowing your whole situation.

Red flags about this program for me would be the following;

Number of Holdings 0-30 stocks

Fees Tiered, 1.65%-1% based on account size.

Hopefully your advisor has asked you the proper questions and knows your situation and risk tolerance levels to help you reach your financial goals.

David

Comment   |  Flag   |  May 01, 2013 from Lititz, PA

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Most of the performance figures seem to be from days gone by. See the stats from 2009. Tells a different story. In my humble opinion. Prateek and Andrew have very good points.

The above referenced information was obtained from reliable sources, however Lantern Wealth Advisors LLC and Lantern Investments, Inc. cannot guarantee its accuracy. The information presented herein is for presentation purposes only and is not intended to provide personal investment advice. Lantern Wealth Advisors LLC and Lantern Investments, Inc. do not provide tax, accounting or legal advice.

Comment   |  Flag   |  May 01, 2013 from Melville, NY

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I am not a fan of wrap fee programs, if that is how you would be doing this. Fees tend to be high, and for some reason, performance often seems to come in less than advertised. You get a ton of confirmations, and 1/5 of your money with one manager is not enough diversification. The idea of customized management is a near-myth unless you have millions to invest.

The CANSLIM program has a long history but it is pretty aggressive, focusing on the highest momentum stocks after they have had big moves already. If you go ahead, make sure this approach is something that you are comfortable with and fits your investment situation and personality.

I would rather you did no-load mutual funds with a fee-only adviser.

2 Comments   |  Flag   |  May 13, 2013 from Charlotte, NC
Rethinking

You get confirms once a month, not for every trade, fee-only advisor with no-load funds, when comparing the true cost of ownership including trading costs of the fund and the fee to the advisor, I would bet the fee is greater that way. 20% in one investment is to much concentration when you can ow.n 30 individual names?? Why pay an advisor to pick a bunch of mutual funds when they could 1. do it on their own or 2. go to Schwab/Vanguard/Fidelity and do just as good. What about talking about portfolio correlation and things that really matter in determining successful portfolio management? The biggest con is paying an advisors to pick a bunch of funds, lets talk about sell discipline, downside risk management and playing offense and defense? Not a fan of wrap accounts? Really, whats wrong with charging 50 basis points and owning individual equities or etf's? A lot cheaper then no load funds when factoring true cost of owning funds and paying a "fee-only" planner. How many clients actually factor in trading cost of the fund? Not a fan of wrap accounts north of 50-75 basis points or any wrap account with mutual funds!

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Flag |  May 13, 2013 near Frisco, TX
David L. Hoshour AIF®

I'm taking about having the lack of diversification that comes by putting 20% with one manager, not the number of underlying stocks. If the client can pick funds on his own, fine. But most do not have the time and expertise, nor the interest in doing that. Just because I didn't address portfolio correlation in this comment doesn't mean I don't believe in it, I do. I don't see many brokers doing 50 bps for wrap accounts with an outside manager. If they are doing it on their own they are kidding both themselves and their client that they can do as good a job analyzing and investing in individual stocks as a firm with dedicated analysts and portfolio managers who will get better information than any individual stockbroker. As for wrap accounts with mutual funds, the ones I've seen are too limited in the fund choices.

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Flag |  May 13, 2013 near Charlotte, NC

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