Our Markets
We serve two primary markets: 1) retail and high net worth investors, and 2) professional service firms and their principals, endowments, foundations, charitable organizations, business entities and labor unions.
We emphasize personal relationships. Our clients are treated like family – we want each client to be successful. We conduct Zoom interviews with clients and discuss their portfolios with them regularly. We respect and like our clients.
Leppla Capital Investment Principles
Leppla Capital invests for Clients in accordance with the following principles:
- Our business starts with knowing the world of available investment options and choosing carefully among them. We’re able to access for consideration every securities investment option publicly available. We also deal with a number of private hedge funds, venture funds, and similar entities.
- We offer customized, professionally-managed investment portfolios with an array of diversified securities designed to maximize risk-adjusted returns.
- We begin each client conversation by understanding the client’s financial objectives, goals, risk tolerance and cash flow requirements. As appropriate, with the client’s input, and given the client’s risk tolerance, where the economy is in the business cycle and other factors, input, we may recommend staging entry into the market over a reasonable period of time – for example, over 3 to 6 months.
- For clients already invested in the market, we believe that staying in the market until investment withdrawals are necessary is typically the best option. Even the most sophisticated investment managers cannot consistently “time” or “beat the market.”
- We believe that the optimal way to achieve outsized market returns is to choose best-in-class investments with low management fees and transaction costs. Therefore, while we often suggest changes in asset allocation and investment selection, we generally recommend remaining invested.
- When choosing ETFs or mutual funds, we choose funds with superior performance over 3, 5 and 10 year periods and low expense ratios.
- When choosing direct equity investments, we focus on the specific objective of the investment. We then apply various quantitative and qualitative criteria designed to achieve the investment’s objective. Criteria will differ for example, for investments designed to produce income – these will be attractively priced and characterized by strong balance sheets, market power and other relevant financial metrics -- whereas the criteria for growth investment choices may include high rates of revenue and EPS growth; uniqueness of, and barriers to entry with respect to, the technology, service or product offering, as well as similar criteria.
- We deploy market hedging strategies based on then current macro-economic factors, global and U.S.-specific economic indicators, technical indicators and valuation metrics.
- Our investment universe is unlimited, but for ease of understanding we divide it into 5 basic areas of investment, as follows:
We offer “best-in-class” investments in each of these sectors.
For Retail Investors: The Leppla Capital Securities Investment Subscription Service.
What is the Subscription Service?
Leppla Capital’s principals have analyzed the universe of ETFs and selected 46 top rated equity and fixed income ETFs across the spectrum of asset classes. Subscribers can choose to invest in individual ETFs or use the selected funds to construct diversified portfolios customized to their individual goals and risk tolerance. And, for those who are interested in a “turn-key” solution, we provide Model Portfolios based on risk tolerance that investors can implement in their accounts as designed by Leppla Capital.
The Leppla Capital funds are almost all Morningstar 4 or 5 rated with low fees relative to the market, and all have consistently performed in the top half or better of their asset class.
How are the Leppla Capital Funds Measured for Performance?
Perhaps most significantly, we “benchmark” the performance of our portfolios with analogous Morningstar portfolios. For example, we compare the Leppla Capital “Moderately Aggressive” portfolio with a Morningstar portfolio comprised of Morningstar similarly rated funds. We provide this comparison to subscribers on a quarterly basis. This gives the retail investor the opportunity to see what the professional fund manager sees – that is, exactly how his Manager’s investments have performed compared to industry benchmarks. To our knowledge this is a unique attribute of the Leppla Capital approach.
How Does the Leppla Capital Approach Differ From Other, Similar Services?
The Subscription Service offers, in our view, “best-in-class” investments in all areas of securities investing.
We are different from services offered by Schwab, Fidelity, Vanguard and similar firms in that these firms believe, understandably, that their “in-house” offerings are the best. We respectfully disagree – we believe each firm has solid products, but further research and analysis is needed to determine which offering of many possible selections is optimal for the applicable asset class. As a result we subscribe to a number of research vehicles; e.g., Morningstar, Schwab, TD Ameritrade, Vanguard, Fidelity; including our own research, to offer our advice.
We also differ from so-called “Robo” advisors in that our recommendations are not computer driven pursuant to models or algorithms, but are made real time by human beings. While we take advantage of technology, we are nimble and responsive to “event driven” market fluctuations in a way that a robo-driven program cannot be.
The Leppla Capital “Moderately Aggressive” Portfolio
By way of example, here is a description of one of our 7 core portfolios, the Moderately Aggressive Portfolio:
Leppla Capital has constructed a Moderately Aggressive Portfolio comprised of 46 top rated equity and fixed income ETFs across the spectrum of asset classes. Compared to the Morningstar market benchmark, this portfolio has less expected volatility and higher expected returns. It is constructed of low-cost ETFs, which results in higher net returns and more money to reinvest, leading to higher returns. The proprietary methodology utilized by Leppla optimizes the diversification of the portfolio in terms of equity and fixed income, domestic and foreign, and value and growth. In addition, we have factored in holdings across industries and selected government, corporate, and muni bonds, as well as convertible instruments, preferred stock and real estate holdings. The highly diversified fund is engineered to capture the best of what the market has to offer for clients whose “risk tolerance” suggests that this is the portfolio to deploy.
Investment Recommendations
Leppla Capital’s principals trade daily for our own accounts in the U.S. securities and options markets. We believe that retail investors can profit from a disciplined approach to investing, along with regular, ongoing investment education. We offer a methodical process that removes emotional decision making. We are students of behavioral traps that reduce success, and help our Subscribers learn how to avoid them. That is what our Subscription Service offers on a regular basis and for a very reasonable fee.
Types of Investment Recommendations
We start by recommending for each Subscriber a Model Portfolio comprised of the traditional equity security asset classes. Our recommendations are based on quantitative analysis and the ETFs or mutual funds we choose are liquid and transparent as to their holdings.
But these are only the first of our recommendations. To this core set of positions we add recommended investments in S&P sector funds, so-called “factor” funds, “special purpose” or “opportunistic” funds, direct investments in equity securities (e.g., Apple, Netflix, emerging growth companies, high dividend paying, relatively safe individual equities, etc.), and other types of investments. For sophisticated investors we offer hedging strategies through ETF investments that are 1X against the market as well as put/call options strategies.
Typical Subscriber Profile
Our typical Subscriber wants to manage his/her own portfolio, but would like to see periodic investment recommendations based on Leppla Capital’s fundamental and technical analysis of the markets and individual investment securities positions within those markets.
The Subscription Service Investment Process
- Subscribers manage their own accounts – this includes all matters relating to custody and trading. We never touch Subscriber funds.
- We begin by providing Subscribers with an online, self-graded risk assessment questionnaire. Subscribers take the questionnaire to assess their own, individual comfort with the levels of risk of loss associated with different types of investments.
- We then ask Subscribers what amount of cash or relatively “riskless” funds the Subscriber wants to keep liquid, safe and out of harm’s way, typically through investment in U.S. Treasury securities, government-backed bond funds, short-term commercial bank CD’s under the FDIC insurance limit of $250,000, or similar types of investments. We encourage to put these funds in relative risk-free investments.
- Once these steps have been completed we offer an initial, foundational investment strategy for a portion of the Subscriber’s funds. These are the Leppla Capital “Model Portfolios” which are divided into 7 levels of risk tolerance – very conservative, conservative, moderately conservative, balanced, moderately aggressive, aggressive and very aggressive. The risk assessment questionnaire is designed to assist the Subscriber in deciding which portfolio is best for them.
- The Model Portfolios are comprised of ETF or mutual fund investments in each of the “traditional” asset classes – fixed income; large capitalization growth, blend and value; mid cap growth, blend and value; small cap growth, blend and value; and international and emerging market funds. REIT and ESG options are also available. All investments are selected as “best-in-class” by our investment team in accordance with our criteria described above.
- The Model Portfolios are suggestions – they are not mandatory. Subscribers are free to pick and choose among any, all or none our investment recommendations and the relative percentages and timing in which they may buy or sell each one.
- Most importantly. the Model Portfolios have been built to be measured against benchmarks – in this case, the applicable risk-tolerance versions of the Morningstar ETF universe as defined by the S&P Dow Jones indices – for example, Aggressive, Moderately Aggressive, and so forth. Our goal is to provide the retail investor with performance indications similar to what a professional fund manager would demand; that is, how did you perform compared to standard market benchmarks? This is an essential benefit of the Subscription Service.
- Thereafter, although not tied to a benchmark, we offer investment choices for Subscribers ranging from direct equity investments in specific stocks to S&P sector ETFs, “factor” ETFs, unique industry or even country ETFs or other investment vehicles and so forth.
- We own what you own, and when we trade we advise all Subscribers through an email blast. We indicate why we are making the initial investment or the trade that we’re making.
- Subscribers may always choose to follow or not follow our advice.
- Finally, educational services – we sponsor Zoom meetings or webinars for our Subscribers to help them understand key investing concepts or economic matters – e.g., precisely how does the Fed liquidity strategy work, and why? – and similar matters.
- And, we produce interactive content where Subscribers can ask questions. We collect the questions and answer those of general interest or which present unusual topics of discussion.
Account Types
Recommendations are made for two primary forms of accounts: either 1) taxable or 2) tax free or “qualified” accounts; e.g., IRA or other defined contribution types of accounts. We do not recommend highly active trading for either type of account, but our taxable account recommendations tend to have longer holding periods and are designed with tax efficiency in mind.
Wealth Through Disciple, Focus, Integrity and Execution
Ours is a serious service where we seek long term accumulation of wealth through slow, steady, thoughtful market activity. We believe this is the only “tried and true way” to be successful. As Warren Buffet has said, “Money flows to the patient investor.”
We abhor subscription services that are “get rich quick” schemes, or have urgent “you must act now” demands, or promise to recommend the latest, best equity in a particular market segment; e.g., 5G or other technology stocks. In our experience these services are, more often than not, disappointing and temporal. This is Not who we are, what we do or what the Subscription Service offers.
Educational Services
We believe that an informed investor is a better investor. As described under Individual Investment Services, [insert link], we provide Subscribers with ongoing education in the areas of fundamental and technical market analysis. Fundamental analysis, for example, will include education on the potential impact on the markets of factors such as fiscal policy, monetary policy, employment numbers, inflation/deflation indices, geopolitical and/or “event-driven” factors, tax policy, analysis of where the economy is in the context of the then current business cycle, and similar factors. Technical education will include securities price and volume movements, market charting and similar tools.
Communications
We communicate regularly with our Subscribers through email. Email notices are sent to Subscribers whenever we make a new or different investment recommendation. The educational component of the service is delivered through email messaging, Zoom Meetings, “White Papers,” webinars and similar communication methods. We respect Subscriber privacy. We do not share Subscriber information in any manner with any third party.
Pricing
For Subscribers who enroll in 2020: $48/month, 6 months payable in advance. The service is free after enrollment until the first day of the following month. The service is automatically renewable thereafter at the same price in 6 month periods, with no price increases ever for our 2020 Subscribers. Subscribers can discontinue by notifying us by email 30 days before the end of any 6-month period.
How to Enroll
Subscribers enroll in the service by emailing bleppla@lepplacap.com. Payment is made through the secure PayPal portal.
Leppla Capital Model Portfolios
We begin with an allocation to traditional asset class investments. Depending on the subscriber’s choices, this foundational portfolio can vary as a percentage of total investment allocation.
Traditional asset class portfolios using our own array of high value add, low expense ratio mutual funds and ETFs are organized as follows:
Passive versus Active Funds
One of the questions we are often asked is “Do you use passive or active funds?”
First, a definition: A passive fund tracks an index (e.g., the S&P 500 equity index, or the Russell 1000 index), with the goal of having the same investments in the same weightings as they are in the market for that particular index. To the extent there is variation this is called the “tracking error.”
An active fund, by contrast, is one in which the individual securities selections are made by the investment managers. The promise, or at least expectation, of an active fund tis that the active fund managers can “beat the market,” in effect providing alpha (higher) returns than the market is providing (called beta returns). Numerous studies have shown that, only from time to time and not consistently, do actively managed funds outperform the market.
Given that, this is our answer to the question:
We prefer passive strategies in efficient markets due to low fees and the tendency of active managers to lag (fall behind) their relevant benchmarks over time. We may use active management when there is not an investable benchmark; for example, real estate, absolute return funds, private equity, and so forth. Or, for example, if there is a compelling investment hypothesis (called a “story”) or a market condition that makes a tactical play in active management likely to succeed over the medium term.
S&P Sector Funds
The S&P 500 Index, which is the general securities market barometer, is divided into 11 separate sectors, as follows:
- Information Technology
Consumer Discretionary (e.g., Louis Vuitton, high fashion retail)
Health Care
- Consumer Staples
- Industrials
- Utilities
- Materials
- Real Estate
- Energy
- Telecommunications
- Financial Services
Leppla Capital follows price and movement trends to identify S&P sectors that should be over-weighted, under-weighted or weighted at peer averages. We provide our Subscribers with this information and recommended ETFs or mutual funds in each sector. As the economy rolls forward these sector allocations will vary over time. Subscribers have the benefit of our analysis and recommendations in constructing their own portfolios.
We use S&P Dow Jones Reports to summarize Monthly, Quarterly and Year-To-Date performance in each of the 11 S&P Sectors. We also use rolling 10 year averages to show the average annual returns, and the best and worst performance periods. A recent example follows:
Factor Funds, Smart-Beta Funds, and other “Alpha” Strategies:
We evaluate these and similar strategies, many of which have become part of lay investor parlance. Our overall philosophy is to look for investments where the manager can actually (and consistently) add alpha, and is it true alpha, or is the manager simply taking more risk than the benchmark?
In this context the primary factors that “factor funds” weight are value, small or micro-cap companies, momentum, low volatility and quality (which often means dividend paying companies). A sixth factor, yield, is sometimes included in the main factor definition count. Thus, in steeply rising or falling markets, one might make a short-term investment in a “momentum” factor fund.
In our experience more often than not returns are increased by engaging in thoughtful asset allocation, as opposed to investing in a “factor” or smart” fund within a distinct asset class. In short, we consider these investments, and the Subscriber can work with us to use them selectively as appropriate given his or her particular risk tolerance profile.