Episode Details

Upthinking Finance™ is now trademarked

On the show this week, I’m joined by Larry Reddell, Partner at St. James Investment Company, to discuss the changing landscape of investing and financial stewardship. We explore the enduring principles of long-term, value-oriented investing in a market that can feel saturated with speculation and passive strategies. Larry shares his experience on the importance of independent thinking and a commitment to client trust, and digs into the lessons learned from market bubbles and the implications of global economic shifts.

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• [01:57] Larry’s early career: partnership culture, training, responsibilities
• [03:22] Contrast between long-term business building vs. short-term gains/acquisition strategies
• [07:02] Core relationships with original investors and philosophy of stewardship
• [10:17] Preference for risk management over short-term performance chasing
• [18:39] Rationale for a highly concentrated portfolio
• [21:16] Dangers and distortions from passive investing and style boxes
• [26:13] Prevalence of behavioral biases after bear markets/booms
• [35:06] Consistency of investment process through cycles
• [40:02] Shift from globalization to deglobalization and its implications

Speculation vs. Investing

Larry and I discuss the difference between speculation and true investing, and Larry paints a picture of markets flooded since 2008 by liquidity and risk-taking, with double and triple-leveraged ETFs and story-driven euphoria replacing careful analysis. He firmly believes that enduring returns come from thoughtful investing, rooted in identifying businesses with clear value and resilient fundamentals.

Rethinking Risk and Reward

Institutional orthodoxy often dictates that managers chase benchmarks or style boxes, regardless of underlying value. This can lead to unhealthy short-termism and a misunderstanding of risk. Larry discusses why his firm intentionally avoids the pressure to keep up with benchmarks, preferring to communicate clearly that they “lag” in euphoric up markets but provide crucial downside protection when turbulence strikes.

Concentrated Portfolios: Fewer Bets, Better Outcomes

Challenging the school of thought that more diversification automatically equals less risk, Larry describes why St. James Investment Company maintains a highly concentrated portfolio—currently only 23 positions. He describes how they seek out durable, proven business models with strong balance sheets and allocate in size only to those ideas with genuine margin of safety. Concentration, when paired with strict criteria and deep research, tends to produce stronger risk-adjusted results than the passive, index-heavy structures currently dominating markets.

Passive Investing and Structural Vulnerabilities

As more dollars are funneled automatically into the biggest index constituents, valuation discipline falls by the wayside, creating a top-heavy market where price no longer reflects fundamental value. The lack of active price discovery, originally intended as the ballast for indexing, flips the system on its head, potentially laying the groundwork for future instability.

Preparing, Not Predicting

Risk management in the current environment means preparing for a wide range of outcomes rather than making predictions. You cannot predict; you can only prepare, which for Larry translates into sticking to a flexible, value-focused approach, resisting crowded trades, and always remembering that capital stewardship requires humility.

The broader macroeconomic landscape has profound implications for investors, which is why there is an increasing preference for hard assets, including selective exposure to