Mike Adams, President and Principal Portfolio ManagerAdams Financial Concepts (AFC) has built its investment strategy around that conviction, combining independent research and concentrated portfolios with a deliberate assessment of each client’s ability to withstand volatility.
The wealth management and investment advisory firm invests primarily in domestic companies positioned to benefit from disruption across demographics, lifestyles and technology, seeking businesses with potential to grow substantially over five to 10 years. Its longest-held position was purchased in 1993 and trimmed in 2018, reflecting the firm’s long-term investment horizon. For every client, AFC’s stated objective is to seek to outperform the S&P 500, with dividends reinvested, over a fiveto 10-year period.
“The higher the return, the higher the volatility. People lose money when they sell during a downturn. Those willing to ride through are our ideal clients,” says Mike Adams, president and principal portfolio manager.
Research-Driven Investment Selection
Behind AFC’s investment strategy is a bottom-up approach that goes beyond economic forecasts or industry trends and focuses on individual companies.
Adams reviews 30 to 40 companies a month, examines the financials of eight or nine, and then conducts deeper research on only one or two. The evaluation draws on 10-Ks, 10-Qs and analyst reports to assess each company’s financial performance and identify businesses with long-term prospects. Despite this extensive work, Adams typically makes only one or two trades a year.
Portfolios are then concentrated in stocks where the potential upside is roughly twice the downside risk. Drawing on game theory and research on portfolio risk, AFC believes a carefully monitored portfolio of eight or nine positions can carry no statistically significant difference in risk or volatility from a much broader portfolio.
Aligning Portfolios with Client Objectives and Risk Tolerance
High concentration of AFC’s portfolios makes the client fit especially important. Every engagement begins with an interview to understand the individual’s objectives, reward-risk expectations and propensity to withstand volatility.
The value of the strategy is measured by portfolio growth and the difference it can make in clients’ lives. In one instance, a client turned to AFC at 65 with $500,000 in savings and a concern that she would have to work for the rest of her life. She initially asked Adams whether her savings could support taking one day off each week. Seven years later, she asked whether she could take more time off; Adams told her she could retire, and she did 18 months later. She later paid off her condominium as a quality-of-life decision. After withdrawing $700,000, her account has grown to about $3.5 million.
“We have a passion for creating wealth,” says Adams.
Staying Invested through Changing Markets
Adams believes the secular bull market that he dates to 2009 is entering a late stage of ‘irrational exuberance’ and sees stagflation as a potential subsequent risk.
Rather than attempting to predict exactly when or how the market will transition, the firm is preparing for both continued market enthusiasm and a possible downturn. It continues to prioritize independent research to identify businesses with longterm value potential while remaining prepared to adjust portfolios as conditions and opportunities evolve.
As markets move through different cycles, AFC's approach rests on identifying the right long-term investments and pairing them with clients that can remain committed to them. By aligning its research-driven strategy with clients prepared to withstand volatility, the firm gives investment opportunities the time they need to yield meaningful returns.
