August 20, 2025 • 41 mins
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Joe Sroka of NovaPoint Capital shares his journey from West Point graduate and military officer to financial advisor, explaining how military discipline informs his investment approach for clients.
• From buying savings bonds during military service to becoming a financial advisor at Merrill Lynch
• West Point education provided strong math and analytical skills that transferred well to finance
• NovaPoint specializes in dividend growth investing rather than high-yield strategies
• Uses covered call options to enhance income and create a disciplined sell methodology
• Targets companies raising dividends consistently, indicating disciplined financial management
• Firm values: experience, discipline, and integrity guide all client relationships
• Willing to accommodate client preferences while maintaining overall portfolio risk parameters
• Regular charitable giving to veterans' organizations including Children of Fallen Patriots
• Personally serves as treasurer for the US Army Ranger Association
• Emphasizes financial education and engagement with clients and family members
Check out NovaPoint Capital to learn more about our approach to dividend growth investing and disciplined risk management.
NovaPoint: https://novapointcapital.com/
Children of Fallen Patriots: https://www.fallenpatriots.org/
Special Operations Medical Association: https://specialoperationsmedicine.org/
Wreath Across America via Johns Creek: https://www.wreathsacrossamerica.org/pages/168142/overview/?Sid=168142%7C14806%7C0%7C4
U.S. Army Ranger Association: https://ranger.org/
Straight Talk for All - Nonsense for None
Please check out our other podcasts:
https://skepticsguidetoinvesting.buzzsprout.com
Disclaimer - These podcasts are not intended as investment advice. Individuals please consult your own investment, tax and legal advisors. They provide these insights for educational purposes only.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Steve Davenport (00:03):
Hello everyone and welcome to Skeptic's Guide
to Investing.
Today we've got my friend andfellow advisor, Joe Sroka from
Nova Point Capital, and Joe is agraduate of West Point, a CFA
and, in general, just a reallygood guy.
Just a really good guy.
(00:23):
Today, unfortunately, ourco-host, glenn Miller, is sick
and he's working on getting hisvoice back, so we're going to
have to just go it alone hereand I think we'll have plenty of
stuff to talk about and plentyof good ideas.
So, Joe, I think that yourbackground is very interesting,
(00:44):
going to West Point and gettinginvolved in registered
investment advisor.
Can you talk to me a little bitabout how the military career
started and then you ended up inthis area?
Or was it a family thing?
Did your dad do financialadvice or how did you come
(01:06):
across, come into this businessof money?
Joe Sroka (01:10):
Sure Great to be here , Steve.
No, I was a freshman in highschool when Ronald Reagan got
elected president for the firsttime and if you remember, that
was sort of the peace throughstrength movement that was.
The Soviet Union is the evilempire, and you know, as a young
man that you know was patriotic, I said, oh, you know, I'd love
(01:32):
to be in the military and serve.
You know, when I get out ofcollege and I had the great
opportunity to go to West Pointand was commissioned a infantry
officer in the United StatesArmy and I was so bought in to
some of the things thatPresident Reagan talked about,
that actually my first dutystation after I went through
(01:54):
training and other things, wasin Berlin, Germany.
So I was with the unit that wasthere and, the way I like to
explain it, there was a wallwhen I got there and there was
not a wall when I left.
So mission accomplished.
Steve Davenport (02:07):
Did you have anything to do with tearing down
the wall, or is that top secretinformation?
Joe Sroka (02:13):
No, well, from a physical standpoint, I have a
very nice box of Berlin Wallrelics at my home.
But no, it was an interestingtime.
Certainly, the military changeda lot during that period.
You know, the Cold War hadended and that was sort of the
(02:35):
reason that you know, I thenwound up leaving the military in
the mid-1990s because I saidwell, you know, it seems like
there's no more enemies left.
Little did we know eventuallywhat would.
Well, you know, it seems likethere's no more enemies left.
Little did we know eventuallywhat would happen, you know, in
the global war on terror.
But at that point it seemedlike there were no enemies left
and I said what else can I dowith my skills?
(02:55):
I had not been a very goodinvestor.
I'd been a good saver but not agood investor.
So actually I would buy asavings bond out of my military
pay every month.
And when I left the Army, theUS government mailed me a
package of savings bonds and Isaid, ok, let me figure out what
to do.
And when I went to go, look forjobs, my first job was to be a
(03:19):
financial advisor at MerrillLynch in New Jersey and I knew
nothing about investing.
The Series 7 was my firstentree to learning about
investing so what did you majorin college.
I majored well, I have abachelor of science degree in
sociology, okay, but I have agreat math background with
(03:39):
engineering and math and physicsand chemistry West Point are
all kind of STEM folk beforeSTEM was a word.
So I sort of took that mathskill and some other things and
applied it to the financialworld and what I discovered was
I really liked it.
I just didn't feel prepared toparticipate in the industry the
(04:00):
level I wanted to.
So after three years at MerrillLynch I left.
I went to business school atthe University of Chicago, which
was a fantastic experience thatreally brought sort of that
math and STEM background I hadand tied it into the financial
world and we sort of reallyhaven't looked back since.
(04:23):
I know you and I said we'd talkabout maybe like options and
derivatives at some point duringthe podcast.
Raghuram Rajan, who's now thedean at the University of
Chicago, was my optionsprofessor.
He later went on to be thegovernor of the Central Bank of
India before coming back to theUniversity of Chicago.
So I had some top flight peopleteaching me about options and
(04:47):
derivatives and then, you know,I sort of entered the
institutional world.
Originally I was a sell sideresearch analyst at AB and Amro
in Chicago went back to MerrillLynch.
I was in New York as a sellside analyst.
I was the building products andhome building analyst at
Merrill Lynch for several yearsand I eventually decided I
(05:11):
wanted to, you know, sort of beon the investment side of the
ledger and worked at a couple ofhedge funds and a couple of
more traditional asset managersand, as you know, eventually my
name's not on the door.
But, metaphorically puttingyour name on the door, you have
to sort of step out and startfrom zero again, and that's what
(05:33):
we did 10 years ago withNovaPoint Capital and started
that firm 2015 and have grown itever since.
Steve Davenport (05:42):
Nice.
I mean I think you guys have avery disciplined process because
I think you both you know, butI think it's interesting that
the firm has such a commitmentto hiring veterans and building
an organization, you think, withdifferent skills.
I mean NovaPoint does justabout everything you would want
(06:04):
from a firm in terms of wealthmanagement right, the accounting
, the planning, the investing,the advice about, you know,
retirement and how to fund itand thinking about the different
ways that people live theirlives and how their money can go
along with their values.
I mean, I think that you guyshave a a wonderful firm and I
(06:29):
guess, um, I can talk aboutderivatives, but I I I feel like
you guys are trying to do thebest thing you can for your
clients and similarly, I usederivatives for writing call
options and and generating someextra premium.
I've always tried to tell peoplethat this is a risk reducer.
(06:51):
I guess you feel similarly thatwhat we're doing with
derivatives can be a great wayto supplement in these markets,
especially a few years ago whenthere was no interest rate.
Their interest rates were zeroand you looked at these people
and they said I still needincome.
How are we going to get it?
(07:12):
Tell me a little bit about howyou use derivatives and how you
believe they should be used forclients.
Joe Sroka (07:18):
Sure.
So if we take a half a stepback, depending what side of the
ledger you're on with anyderivative product, right, they
have different purposes.
You can hedge, you canspeculate or you can create
income, and so where we use itis we use it in the hedging and
generating income.
So we use the simplest form ofderivatives, we use covered call
(07:39):
options.
We're primarily an equitymanager.
We manage four different typesof equity strategies and maybe
this is a quick side step outinto income.
We run the dividend growthstrategy, which is our primary
strategy.
The idea is not for dividendyield, it's for growth of
dividend because, as we know, ifyou're a company that can grow
(08:02):
your dividend consecutively forfive years, 10 years, 25 years,
50 years, it probably means thatagain, you're a disciplined
financial organization, as acorporation, you're not taking
wild speculative bets with yourbalance sheet.
You're growing your revenueevery year, you're growing your
cash flow every year, and thenyou can afford to continue
(08:23):
raising your dividend.
So we just see it as sort of agreen flag and a virtuous cycle
for companies that are able toconsecutively raise their
dividend for five or more years.
But that doesn't necessarilyproduce high yield if you're
growing your dividend a lot.
So what we incorporated intothat same strategy was writing
(08:44):
covered calls, and we write thecovered calls for the reasons we
discussed.
One it does generate moreincome for the portfolio.
It does reduce some riskbecause basically we're selling
off risk when we sell thecovered call.
But the other thing it does andI think traditionally this is
what analysts have had ahorrible time with and portfolio
managers have a horrible timewith is having a sell discipline
(09:06):
.
So what we'll typically do iswe will write covered calls
anywhere from 60 to 90 days, atleast 10% higher than the
current position, and ideallywe're trying to find stocks
where we're writing it at theprice that if it reached that
price, we'd be willing to let itgo.
So we use part of our selldiscipline.
(09:27):
So if we get called out unlessthere was something along the
way so you have your option onfor 90 days.
Ideally it's going to expire Ifit blows through the strike
price.
Well, one of two thingshappened.
One, the market got overlyoptimistic about the stock and
we could let it go, or somethingfundamentally has changed with
(09:49):
the company and now our pricetarget would have gone higher.
And if our price target goeshigher, then what we'll either
do is we'll roll that optionforward to a higher strike
another 60 or 90 days out, or,in some cases where you have to
admit your mistakes, we'll justcover off the option and move on
(10:10):
.
But typically, more than 90% ofthe time our options are
expiring, it's creating a littlebit of extra income and month
in, month out is taking a littlebit of volatility off of the
portfolio For folks that needmore yield.
What is not included in ourdividend growth strategy?
We buy no REITs and we buy noutility companies.
(10:32):
We don't buy any REITs in thatstrategy because REITs don't
necessarily grow their dividendsas consistently as stocks and
other sectors.
So we do have a separate REITportfolio and then we have a
separate utility portfolio.
Again, utility companies don'tnecessarily have that discipline
(10:54):
of growing their dividends onan annual basis, so we can sort
of mix and match portfoliostogether to create an investment
strategy for each individualclient.
We also have fixed income, alanConner, who's my co-founder at
NovaPoint.
He's been a bond trader in hisprevious life.
(11:15):
So myself being primarily anequity investor and Alan being
primarily a fixed incomeinvestor, we made a nice combo
to start the firm and then we'vecontinued to roll out
investment strategies that youknow, for the benefit of our
clients.
We're trying to, you know,focus on growth, focus on income
, focus on a combination of thetwo, depending what they need.
Steve Davenport (11:37):
That sounds great.
Can I ask you, when you decideto write a call, do you do it
for the whole position, do youdo it for half of the position
and then later on put anotherhalf on?
Or how do you decide that it'san all or nothing moment, or you
just try to be consistent ineverything and do the same
(11:57):
amount.
Joe Sroka (11:58):
Yeah, so for the dividend growth portfolio, right
now we own 34 positions, solet's for argument's sake, call
it about.
Each one's a 3% position, notevery client.
When we're mathing out that 3%position is going to have all
round lots.
(12:18):
Right, there's going to be anodd lot in there, so we'll write
to the round lot.
But, yeah, we'll write thewhole position because we've
determined that one of theconditions is being met, or all
of the conditions are being met,that we're going to set a price
10% or higher for 60 to 90 daysand we're going to pull in over
(12:40):
that 60 to 90 days more than 50basis points or about a 2%
annualized yield.
If we wrote, you know, 90 daysfour times over the course of
the year, and typically whatwill happen is when we get you
know really excited and put anoption position on, all of those
criteria are being met andthey're being met in excess of
that.
So we've written you knowpositions where we're getting
(13:03):
more than 1% over a 60-dayperiod for maybe 15% up and we
say, okay, if the stock movesthat much in that time period,
maybe that's our sell disciplineand we're willing to get out of
it.
(13:26):
Cmt Chartered Market Technician.
So what we do factor in whenwe're looking at the option
positions is we'll look at RSIsand we'll look for overbought
positions, ideally, and so onethe stock's already had some
optimism on it.
We're going to take a stepbeyond that optimism to a level
we'd be willing to sell at, andwhat happens a lot of times is
maybe that stock's going to marktime and consolidate because
it's made a move at.
And what happens a lot of timesis maybe that stock's going to
mark time and consolidatebecause it's made a move higher
(13:48):
and what we will do is we willhave gotten compensated for
owning that stock while it'smarking time and consolidating a
position.
Steve Davenport (13:59):
That's good.
I know we have a little trouble.
Sometimes you just fall in lovewith the name.
My partner really loves Costcoand I like Costco, but Costco
just seemed to get so far aboveits moving average and outside
of its bands.
And I guess I want to say, doyou find it hard sometimes to be
(14:23):
in that position and be thatdisciplined?
Because sometimes you do kindof?
I always tell my partner thatwe date names, we don't marry
them, that we have arelationship for a period with a
name but we're not looking tosettle down with any name.
How do you feel about gettingin and out of names like that?
(14:47):
Do you find it hard to becompletely unbiased?
Joe Sroka (14:53):
I find it hard to be unbiased in what I'm going to
call core names.
Okay, so when we put theportfolio together, let's just
face it.
There's some names that youknow that you can own them for
10 and 20 years.
You know the Microsofts andWalmarts and Apples.
And we try not to be too cutewith ourselves where we say, oh
(15:16):
my God, you know Apple went up12%, let's get out of it,
Because we know, even if itpulls God, you know Apple went
up 12%, let's get out of it,Because we know, even if it
pulls back, you know it's a nameyou still want to own.
Right it's.
You know it's a high qualitycompany, it's been raising its
dividend.
Let's go back to the originalreason.
We own things in the portfolio.
Right, it's a high quality name, it's growing its revenue, it's
(15:37):
growing its cash flow, it'sgrowing its dividend.
Steve Davenport (15:41):
So, yeah, we do struggle a little bit of time
with a core position where wesay you know what, let's either
roll the option out and nowmaybe we've created a, you know,
120 day or 180 day cycle whereat some point along that line
(16:02):
the stock's going to pull backand then the option's going to
go off.
Yep, I mean, we had an advisorymeeting and somebody asked me
why I held Microsoft in ourglobal dividend strategy.
And they said well, you know,you're only getting paid 0.6 or
0.7%, why own it?
And I talked about dividendgrowth versus dividend and we
talked about the strength of thebrand, about dividend growth
(16:22):
versus dividend, and we talkedabout the strength of the brand.
And it's kind of hard to whenyou have 35 names and we have 40
names, you find it a littledifficult to get the yield when
you take one of those names.
That's well below the averagein yield.
Joe Sroka (16:37):
But you bring up an interesting point, and this is
now that we've been running thestrategy for over 10 years.
A little thing that maybe it'shard to communicate with clients
at the outset, but is theconcept of yield on cost.
So we have clients where webought Microsoft 10 years ago.
Steve Davenport (16:59):
Yeah.
Joe Sroka (17:00):
Okay, once again, it had a one-handle dividend yield.
It still has a one-handledividend yield, but the
dividends grown.
I don't have the exact numberin my head, but I mean it's
grown in excess of 10% a year.
And then what often we find isstocks trade at yield parity, or
(17:25):
what I phrase is, if you'resort of a 1.5% dividend yield,
you're always a 1.5% dividendyield, but you're growing your
dividend in excess of 10% a yearand your stock's going up in
excess of 10% a year, and sowhat you really wind up with is
capital appreciation accountsfor more of the total return of
the portfolio than the dividendyield.
(17:47):
But also you'll look back andsay, well, because the dividends
grown so much, you know I mayhave a 7, 10, 12% yield on my
original cost basis.
Right, and if you think aboutit, you know, for clients that
are eventually, you know growingwealth to retire or you know
(18:07):
going to use income in thefuture, we're reinvesting all
those dividends if money is notgoing out of the account and
compounding and then at the sametime, when you need to turn on
the spigot at the other end,we've grown the cashflow
potential of the portfolio overthat 10 plus year period so that
, relative to the originalprinciple you put into the
(18:29):
account, you're getting quitelucrative cash flow, instead of
saying I locked myself into a 3%yield for life.
Steve Davenport (18:41):
Correct.
I think it's great.
I mean I believe in it and Ithink it's great the way you've
implemented it.
Can you just talk to me alittle bit about NovoPoint and
what you think the value add is?
Or how do you look at it ifsomebody is on the street said,
hey, what is NovoPoint reallygreat at?
I mean, is it the customerservice?
Is it the returns?
(19:02):
Is it the risk management?
Like, what is it that you wouldcharacterize as your strength,
besides your good looks andpersonality that I know you and
Alan are more than gifted in?
If somebody wanted to not lookat your pictures, but wanted to
understand the firm I have aface for podcasting, steve.
Joe Sroka (19:26):
Come on.
The tagline that we have forNovaPoint which you know wasn't
dreamed up for marketingpurposes, dreamed up to be
genuine is experience,discipline and integrity, and I
really think we do bring that toclients.
Alan and I both hadinstitutional-level careers
(19:48):
before we opened a registeredinvestment advisory firm.
We are quite disciplined in ourinvestment approach but that's
because we're quite disciplinedin our personal lives.
As you mentioned, I'm a formerUS Army officer, west Point
graduate.
Alan's a triathlete which takesquite a bit of discipline, you
know, to accomplishIronman-level triathlete
(20:11):
performance.
So that same discipline that wehave in our lives was the same
discipline we bring into theinvesting.
And then integrity the last oneand I know in our modern world
integrity is sometimes a hollowbuzzword, but I've lived by the
West Point Honor Code my entirelife.
(20:32):
I believe it.
I share it with other people.
I want to have businesspartners that buy into that and,
yeah, we do treat our clientswith the utmost integrity, aside
from being a CFA or being afiduciary, because we're RIAs.
We tell people bad news whenthere's bad news to tell.
We tell people good news whenthere's good news to tell.
(20:52):
The way our investmentperformance works?
Is we do very well in volatileperiods of time?
Is we do very well in volatileperiods of time?
2018-19 was a good period oftime for us.
2022 was a good period of timefor us.
We've won a couple of awardsfrom the you know whatever
(21:17):
things that follow portfoliomanagers, and one of the things
we've won is what's referred toas a Bull Bear Award, where our
upside capture is very stellarrelative to our downside capture
.
That's great.
So what we're really doing iswe're trying to capture, you
(21:37):
know, 90 plus percent of themarket on the way up and you
know we're then tracking lessthan 70% on the way down, and
it's that combination,especially if you're going to be
, you know, a multi-yearinvestor.
As I said, we've been runningthe strategy for over a decade
that's really going to pay offover time is.
You know it's nice to own allthe hot, sexy stocks, but you
(21:58):
know a lot of times you'll runyourself off a cliff when you do
that.
Stoned all the hot, sexy stocks, but you know a lot of times
you'll run yourself off a cliffwhen you do that and, at the
same time, you don't want to ownonly boring.
You know.
You know low growth stocks.
So the ability to say I have aportfolio that can participate
well on the upside, even if itdoesn't get every last basis
point, but at the same time,knowing that I'm not going to
(22:18):
fall nearly as much on themarket when we go into these
typical rough periods whether itwas something we saw earlier
this year, you know.
Or, like I said, interest ratecycles from the Fed back in you
know 2018, you know when we hadthe inflation spike, you know
it's good to know that you havea portfolio that's durable
through cycles, and I thinkthat's really what we do because
(22:40):
of the discipline we can bedurable through cycles.
And then, just last thing, youknow, my one personal philosophy
is it's always the client'smoney.
So we do work with our clients.
You know two ways.
That I think is somewhat unique.
As much as you know, we'rerunning set strategies.
We will accommodate clientsindividual wishes.
(23:04):
We have some clients that youknow.
I love this, joe, but I'm notowning any oil stocks, I'm not
owning any defense stocks, etcetera.
Or we also have the um.
You know, I think like Teslawas a good example.
Um, dividend growth I get itSounds good, but I'm a Tesla
fanatic and I own some of thatin the same account and we'll do
(23:24):
carve outs.
And we have a sophisticatedenough portfolio management
system that we can run the restof the strategy around some
clients' individual wishes,because at the end of the day,
like I said, it's their money.
Steve Davenport (23:37):
Correct.
I think that's great because Ithink that a lot of us CFAs and
some people in the industry justsay well, if it's our best
thinking, everybody needs tohave our best thinking and I
think that our best thinking isimportant.
But it's also important that youget the right behavior from
clients and if you get clientbuy-in to the names, then that
(23:58):
buy-in means they'll probablybehave better in a down market
or they'll behave better incertain situations and
ultimately, I think we bothrealize and you can disagree if
you want but I think behavior ofour clients is the main thing.
We're trying to manage.
The returns I think will comeand go based on some periodicity
(24:20):
, but how clients behave andfeel about their portfolio.
I mean I've become more of abehavioral investor than I have
been a quant investor, because Ireally think that there is a
portfolio out there that youfeel good about and if you feel
good about it, you feel goodabout the advisor who's doing
(24:41):
the diligent work you're likelyto be a better you know a better
client on the long end and havebetter results.
Joe Sroka (24:50):
Yeah, and I think the thing that we concentrate on
with risk management is we usesome of the you know off the
shelf software as a service risksoftware, and we will.
We have the clients take thebehavioral risk questionnaire at
the beginning of therelationship and then every time
(25:10):
there may be a significantchange in life you know I'm now
retiring, okay, well, how is myrisk need to shift or how's my
perception of risk need to shift?
And then we try to manage theportfolio Because, as I said, we
can stack, we can have dividendgrowth, we can have more
growthy names, we can haveutilities, we can have REITs, we
can have fixed income and wemanage to the risk number for
(25:34):
the client.
So when you're managing to therisk number like that, it's okay
to say you're going to have oneor two speculative positions
that are important to you andthat's also good because it
keeps the clients engaged oninvesting.
But then as long as we'redialing the overall portfolio
risk into the range that suitsthe client's risk tolerance,
(25:56):
then I feel we're doing a goodthing and we're really working
as partners.
Steve Davenport (25:59):
Yeah, that's great.
I mean, I think one of thethings I've noticed about
NovaPoint is the integrity part.
I think you guys take yourintegrity seriously and you take
your clients and therelationship very seriously and
you apply you know, as you do inyour own lives a great deal of
discipline and care and care.
(26:25):
And one of the things I'vealways been interested in is
your commitment to vets and themilitary, kind of compassionate
capitalism.
Can you talk a little bit aboutwhat your firm does to try to,
you know, give back, Because Ithink that giving to your
clients is one thing but alsogiving broader to the community,
I think, sets another, you know, level of commitment.
Joe Sroka (26:48):
Yeah, so I'm glad you mentioned that.
So we do a couple of things.
When we first started the firm,I said you know we, you know we
should be charitable inclined.
We're, you know, making moneyout in the economy.
We should figure out a way tochannel some of it to things
that we care about.
So, as you mentioned, I'm aveteran.
(27:09):
Alan's son is an Army veteran aswell.
That was one of the firstaffinity points that struck up
between Alan and I when we metand we said well, we all in our
families ourselves or ourselvesor our families are involved
with veterans, so let's figureout ways to help veterans.
So we sort of came up with youknow, maybe it's a bit gimmicky,
(27:31):
but we said you know what aresort of two important days in
the year, and one of them isVeterans Day and the other one's
Memorial Day.
They have distinct purposes,you know, one is for people that
we've lost and one is for allveterans.
But we said that's probably agood time to, you know,
celebrate what we care about.
So we make donations roughlyevery six months because it
(27:54):
winds up being May and Novemberto several different veteran
charities that we care about.
That, you know, in many caseswe're personally involved with,
and I'll give you an example.
One of them that we've, youknow, given to you now for 10
straight years is Children ofFallen Patriots, a phenomenal
organization that providescollege scholarships to the
(28:18):
children of, you know, soldiers,sailors, airmen that have lost
their lives in the global war onterror.
Steve Davenport (28:27):
That's great.
Joe Sroka (28:29):
That I have a personal affinity to that.
That organization was foundedand is run by one of my West
Point classmates and his wife,so I know the people that are
running it personally.
You talk about integrity anddiscipline.
It's someone that and you knowthis is important in nonprofits
we're giving money to anonprofit to deploy and we trust
(28:51):
the people that run thatnonprofit right, so that
integrity chain moves the wholeway.
We also do things locally.
We're supporters of WreathsAcross America.
That goes to the VeteransCemetery in Canton, georgia,
every December.
So again, you know, makingimpact local.
(29:11):
And then I personally, I have avolunteer job outside of my job
at Nova Point.
I'm the treasurer for the USArmy Ranger Association and
that's a national organization.
We have 10 regions around thecountry and we provide financial
assistance to rangers and theirfamilies if they need it.
(29:34):
We provide scholarships tochildren of Army Rangers and we
provide, you know, connectingevents, you know, in the
different regions for rangers tolink up, ranger veterans to
link up, you know, and have acommunity.
The sort of tagline for theorganization is, you know,
(29:56):
connecting Army Rangers past,present and future.
And that's what we really do.
We've everything from World WarTwo Rangers up to Global War on
Terror Rangers and we'vecreated a community for them and
, you know, work to financiallyenable that community.
Steve Davenport (30:12):
That's great.
I mean I think that what you'redoing is inspiring and I think
it's great for others to see.
I mean I'll try to include ifyou send me those URLs'll
probably put them in thetranscript so that people can
check them out when they checkout the podcast I think, that's
great.
Um, one question we ask a lot ofour guests and just um, it's
(30:36):
kind of I mean, this is probablythe last question is how, how
do you get experience with moneyand do you have anything in
your money story that if youcould say to Joe, who's 20, joe,
here's what you learned andyou'd like somebody who comes
(30:57):
behind you to try to dodifferently?
Can you just give us a littletaste?
Did your family talk aboutmoney when you were growing up?
Did you?
Did you have a kind of tabootopics that you, you wanted to
leave dinner in one piece?
So you, you talked about thingsthis way, or you?
You know, I know that familydinner tables and ideas about
(31:20):
money can be somewhat difficultto get through.
Joe Sroka (31:27):
Yeah, so I grew up in New Jersey.
My father, well, you know, farfrom a wealthy man, he had not
even been a high school graduate, he was a bartender in New York
City.
He was actually a fairly famousbartender in New York City.
There's New York Times storiesabout him at the Algonquin Hotel
(31:50):
in New York, which is fairlyfamous.
So he's a well-known bartender.
But even if you're a well-knownbartender, that's a lot
different in Midtown thanworking downtown on Wall Street.
And then my mother was a schoolnurse.
So I grew up, you know I'm goingto call it fairly humble
backgrounds.
We weren't, you know, destituteor anything.
But you know, I think what myparents did instill in me
(32:15):
everything from sort of the, youknow, mowing lawns and washing
cars.
You know, when you're ateenager and getting a job, I
think I've always, just, youknow, been inspired by them to
work and contribute, and I'mvery happy.
I have two daughters.
They have a lot betterfinancial education than I had
(32:37):
starting out because I'm theirdad.
So you know, I've gotten theminterested in understanding.
You know, why do you own thisstock or that stock in your
account?
And my younger daughter is theone that's taken to it a little
bit more.
She has selected some of thestocks for her account.
So when you get to the makingaccommodations for clients that
(33:00):
you know really care about onestock.
With my daughter we do the samething.
We own some of the stocks thatI think are good for her and she
owns some of the stocks thatshe thinks is good for her.
But she hasn't done bad.
Steve Davenport (33:13):
No, my son and I do the same thing and I think
it's one of the best parts ofour relationship is that he
really does care about.
He just sent me a text theother day.
He says have you thought aboutany investments in the nuclear
area?
And I was like, oh boy, youknow, like my clients don't send
(33:35):
me questions like that, but hedoes, you know.
Joe Sroka (33:39):
That's a great dialogue to have and whether
it's the dialogue I have with myown daughters or the dialogue
we have with clients, I thinkpeople being engaged in the
thought of investing it does acouple of things for them.
One, it makes the relationshipwith the money manager real.
This person is really workingon my behalf because I'm
(34:02):
actually seeing what they'redoing and I'm learning about the
names that they're buying.
But second, in some situationsit keeps folks from getting
ripped off.
My biggest I don't know disgustabout the industry that we're
in is there are plenty ofunscrupulous people and there
(34:23):
are plenty of people that don'tbelieve it's the client's money,
as we found out over time.
And you know I try to, you know, hopefully steer people away
from those situations and we'reglad that everyone that works
with us you know, like I said,we're good fiduciaries.
We think we're, you know,treating them with the utmost
integrity and we're trying toprovide an education element
(34:47):
that really binds them to us sothat they can have a good
experience and a good financialfuture.
Steve Davenport (34:53):
Unfortunately, my son's also very good at
looking back with regret andhe's reminded me about the
Bitcoin at $20,000 that wedidn't buy, about the Bitcoin at
20,000 that we didn't buy, andI've told him I still don't
understand how the value isdetermined, so I'm not going to
buy it.
And he's mentioned somethingabout my age and my mental
(35:16):
abilities, but I'm not going toprobably go through it in detail
, but I think that you have todiscuss some of the things that
don't you know.
I mean, yes, I said to him ifyou want to take a flyer and
take a certain percent and putit in there, knock yourself out,
but I'm not.
You know what I mean.
I'm not in agreement and and Ithink it's um, you know, I mean
(35:41):
the there's, there's there'slots of different colors in the
world and everybody kind ofgravitates towards different
names and different things.
And I think at his age, maybeyou know Bitcoin is a good
lesson or maybe there'ssomething there that's going to
help him further down the line.
But that's the one regretinvestment we've had.
(36:01):
But he's had some good luckwith NVIDIA and Microsoft and
Oracle.
He's a very tech-orientedinvestor and so now he's
thinking about broadening andhaving a little bit of gold and
having some other things.
So I think it's great justbecause I believe that when I
(36:22):
was growing up, we didn't reallytalk about you know what, how
much money you should save andhow much, how much should you
spend and you know what.
And I think that now, havingthose discussions, you realize
that it does make everyone youknow what I mean.
It's it's not a comfortabletopic, but the fact that you're
having it in means feels likeit's a deeper and better
(36:47):
relationship.
Joe Sroka (36:48):
Yeah, I think any form of communication you have
with your kids is great, whetherit's around sports, whether
it's around investing, whetherit's around different activities
.
Graduated from college thispast year, when she graduated
from high school, we bought herseveral hundred dollars of
(37:10):
Bitcoin as her high schoolgraduation present and she still
owns it and she's quite happy.
But she also owns, you know,microsoft and Walmart and some
other things in her investmentaccount.
So, again, it's a good balanceand keeps her engaged and, you
know, sort of always welcomesthe mind to new ideas.
You know there's anintellectual capital, business
and intellectual capital can'tbe stale.
You have to continually readand learn and, you know, be open
(37:35):
to new ideas and evolve.
Evolve is a good word.
A good word, yes.
Steve Davenport (37:38):
Okay, I mean this is evolving, so I'd like to
wrap up.
I mean this is evolving, so I'dlike to wrap up.
What final?
Joe Sroka (37:52):
comments.
Do you have Anything, Joe,about the business or personnel
lead or you're?
Steve Davenport (37:54):
involved.
How satisfied are you when youdo things with the volunteering?
It seems like you do a lot ofvolunteering, so you must feel a
certain affinity or joy you'regetting from those things.
Joe Sroka (38:05):
Yeah, I'm a big believer and you know I've done
different things over my life.
You know, for those familiarwith, you know, atlanta, you
know, when my daughters wereyoung, I, you know, coached
soccer at Top Hat, even though Ididn't know anything about
soccer.
But at their age it reallydidn't make a difference.
But you know, I think you knowwe have, you know, resources
(38:27):
that are finite, right, you knowmoney is a finite resource,
time is a finite resource, andyou know we can contribute our
time and we can contribute ourmoney to different things.
You might as well contributethem to things that you enjoy,
where you make an impact, thatyou get satisfaction back from.
So, whether it's, like youmentioned, charitable giving to
(38:47):
veterans organizations or, youknow, doing things in the local
community, it's important to dothings that you feel you're
making an impact.
I think the biggest problem,you know maybe nonprofit
organizations and otherorganizations that rely on
volunteers if it's not a goodexperience for the volunteer,
they're going to stopvolunteering, you know.
(39:08):
So I think being involved inorganizations that you identify
with, you believe in and you getsatisfaction from working with
goes a long way to keepingpeople engaged, and then the
longer people are engaged, thebetter the impact is.
Steve Davenport (39:23):
That's great.
Thank you, joe.
So, listeners, I appreciate youlistening and we'd love you to
like and share Skeptic's Guide,and if you have any comments,
please reach out and we'll tryto put some of the things that
Joe's involved with in our notes.
So check it out and pleaselisten.
(39:44):
We got some great guests comingup, so thank you everybody and
have a great day.
Hello everyone and welcome to Skeptic's Guide
to Investing.
Today we've got my friend andfellow advisor, Joe Sroka from
Nova Point Capital, and Joe is agraduate of West Point, a CFA
and, in general, just a reallygood guy.
Just a really good guy.
(00:23):
Today, unfortunately, ourco-host, glenn Miller, is sick
and he's working on getting hisvoice back, so we're going to
have to just go it alone hereand I think we'll have plenty of
stuff to talk about and plentyof good ideas.
So, Joe, I think that yourbackground is very interesting,
(00:44):
going to West Point and gettinginvolved in registered
investment advisor.
Can you talk to me a little bitabout how the military career
started and then you ended up inthis area?
Or was it a family thing?
Did your dad do financialadvice or how did you come
(01:06):
across, come into this businessof money?
Joe Sroka (01:10):
Sure Great to be here , Steve.
No, I was a freshman in highschool when Ronald Reagan got
elected president for the firsttime and if you remember, that
was sort of the peace throughstrength movement that was.
The Soviet Union is the evilempire, and you know, as a young
man that you know was patriotic, I said, oh, you know, I'd love
(01:32):
to be in the military and serve.
You know, when I get out ofcollege and I had the great
opportunity to go to West Pointand was commissioned a infantry
officer in the United StatesArmy and I was so bought in to
some of the things thatPresident Reagan talked about,
that actually my first dutystation after I went through
(01:54):
training and other things, wasin Berlin, Germany.
So I was with the unit that wasthere and, the way I like to
explain it, there was a wallwhen I got there and there was
not a wall when I left.
So mission accomplished.
Steve Davenport (02:07):
Did you have anything to do with tearing down
the wall, or is that top secretinformation?
Joe Sroka (02:13):
No, well, from a physical standpoint, I have a
very nice box of Berlin Wallrelics at my home.
But no, it was an interestingtime.
Certainly, the military changeda lot during that period.
You know, the Cold War hadended and that was sort of the
(02:35):
reason that you know, I thenwound up leaving the military in
the mid-1990s because I saidwell, you know, it seems like
there's no more enemies left.
Little did we know eventuallywhat would.
Well, you know, it seems likethere's no more enemies left.
Little did we know eventuallywhat would happen, you know, in
the global war on terror.
But at that point it seemedlike there were no enemies left
and I said what else can I dowith my skills?
(02:55):
I had not been a very goodinvestor.
I'd been a good saver but not agood investor.
So actually I would buy asavings bond out of my military
pay every month.
And when I left the Army, theUS government mailed me a
package of savings bonds and Isaid, ok, let me figure out what
to do.
And when I went to go, look forjobs, my first job was to be a
(03:19):
financial advisor at MerrillLynch in New Jersey and I knew
nothing about investing.
The Series 7 was my firstentree to learning about
investing so what did you majorin college.
I majored well, I have abachelor of science degree in
sociology, okay, but I have agreat math background with
(03:39):
engineering and math and physicsand chemistry West Point are
all kind of STEM folk beforeSTEM was a word.
So I sort of took that mathskill and some other things and
applied it to the financialworld and what I discovered was
I really liked it.
I just didn't feel prepared toparticipate in the industry the
(04:00):
level I wanted to.
So after three years at MerrillLynch I left.
I went to business school atthe University of Chicago, which
was a fantastic experience thatreally brought sort of that
math and STEM background I hadand tied it into the financial
world and we sort of reallyhaven't looked back since.
(04:23):
I know you and I said we'd talkabout maybe like options and
derivatives at some point duringthe podcast.
Raghuram Rajan, who's now thedean at the University of
Chicago, was my optionsprofessor.
He later went on to be thegovernor of the Central Bank of
India before coming back to theUniversity of Chicago.
So I had some top flight peopleteaching me about options and
(04:47):
derivatives and then, you know,I sort of entered the
institutional world.
Originally I was a sell sideresearch analyst at AB and Amro
in Chicago went back to MerrillLynch.
I was in New York as a sellside analyst.
I was the building products andhome building analyst at
Merrill Lynch for several yearsand I eventually decided I
(05:11):
wanted to, you know, sort of beon the investment side of the
ledger and worked at a couple ofhedge funds and a couple of
more traditional asset managersand, as you know, eventually my
name's not on the door.
But, metaphorically puttingyour name on the door, you have
to sort of step out and startfrom zero again, and that's what
(05:33):
we did 10 years ago withNovaPoint Capital and started
that firm 2015 and have grown itever since.
Steve Davenport (05:42):
Nice.
I mean I think you guys have avery disciplined process because
I think you both you know, butI think it's interesting that
the firm has such a commitmentto hiring veterans and building
an organization, you think, withdifferent skills.
I mean NovaPoint does justabout everything you would want
(06:04):
from a firm in terms of wealthmanagement right, the accounting
, the planning, the investing,the advice about, you know,
retirement and how to fund itand thinking about the different
ways that people live theirlives and how their money can go
along with their values.
I mean, I think that you guyshave a a wonderful firm and I
(06:29):
guess, um, I can talk aboutderivatives, but I I I feel like
you guys are trying to do thebest thing you can for your
clients and similarly, I usederivatives for writing call
options and and generating someextra premium.
I've always tried to tell peoplethat this is a risk reducer.
(06:51):
I guess you feel similarly thatwhat we're doing with
derivatives can be a great wayto supplement in these markets,
especially a few years ago whenthere was no interest rate.
Their interest rates were zeroand you looked at these people
and they said I still needincome.
How are we going to get it?
(07:12):
Tell me a little bit about howyou use derivatives and how you
believe they should be used forclients.
Joe Sroka (07:18):
Sure.
So if we take a half a stepback, depending what side of the
ledger you're on with anyderivative product, right, they
have different purposes.
You can hedge, you canspeculate or you can create
income, and so where we use itis we use it in the hedging and
generating income.
So we use the simplest form ofderivatives, we use covered call
(07:39):
options.
We're primarily an equitymanager.
We manage four different typesof equity strategies and maybe
this is a quick side step outinto income.
We run the dividend growthstrategy, which is our primary
strategy.
The idea is not for dividendyield, it's for growth of
dividend because, as we know, ifyou're a company that can grow
(08:02):
your dividend consecutively forfive years, 10 years, 25 years,
50 years, it probably means thatagain, you're a disciplined
financial organization, as acorporation, you're not taking
wild speculative bets with yourbalance sheet.
You're growing your revenueevery year, you're growing your
cash flow every year, and thenyou can afford to continue
(08:23):
raising your dividend.
So we just see it as sort of agreen flag and a virtuous cycle
for companies that are able toconsecutively raise their
dividend for five or more years.
But that doesn't necessarilyproduce high yield if you're
growing your dividend a lot.
So what we incorporated intothat same strategy was writing
(08:44):
covered calls, and we write thecovered calls for the reasons we
discussed.
One it does generate moreincome for the portfolio.
It does reduce some riskbecause basically we're selling
off risk when we sell thecovered call.
But the other thing it does andI think traditionally this is
what analysts have had ahorrible time with and portfolio
managers have a horrible timewith is having a sell discipline
(09:06):
.
So what we'll typically do iswe will write covered calls
anywhere from 60 to 90 days, atleast 10% higher than the
current position, and ideallywe're trying to find stocks
where we're writing it at theprice that if it reached that
price, we'd be willing to let itgo.
So we use part of our selldiscipline.
(09:27):
So if we get called out unlessthere was something along the
way so you have your option onfor 90 days.
Ideally it's going to expire Ifit blows through the strike
price.
Well, one of two thingshappened.
One, the market got overlyoptimistic about the stock and
we could let it go, or somethingfundamentally has changed with
(09:49):
the company and now our pricetarget would have gone higher.
And if our price target goeshigher, then what we'll either
do is we'll roll that optionforward to a higher strike
another 60 or 90 days out, or,in some cases where you have to
admit your mistakes, we'll justcover off the option and move on
(10:10):
.
But typically, more than 90% ofthe time our options are
expiring, it's creating a littlebit of extra income and month
in, month out is taking a littlebit of volatility off of the
portfolio For folks that needmore yield.
What is not included in ourdividend growth strategy?
We buy no REITs and we buy noutility companies.
(10:32):
We don't buy any REITs in thatstrategy because REITs don't
necessarily grow their dividendsas consistently as stocks and
other sectors.
So we do have a separate REITportfolio and then we have a
separate utility portfolio.
Again, utility companies don'tnecessarily have that discipline
(10:54):
of growing their dividends onan annual basis, so we can sort
of mix and match portfoliostogether to create an investment
strategy for each individualclient.
We also have fixed income, alanConner, who's my co-founder at
NovaPoint.
He's been a bond trader in hisprevious life.
(11:15):
So myself being primarily anequity investor and Alan being
primarily a fixed incomeinvestor, we made a nice combo
to start the firm and then we'vecontinued to roll out
investment strategies that youknow, for the benefit of our
clients.
We're trying to, you know,focus on growth, focus on income
, focus on a combination of thetwo, depending what they need.
Steve Davenport (11:37):
That sounds great.
Can I ask you, when you decideto write a call, do you do it
for the whole position, do youdo it for half of the position
and then later on put anotherhalf on?
Or how do you decide that it'san all or nothing moment, or you
just try to be consistent ineverything and do the same
(11:57):
amount.
Joe Sroka (11:58):
Yeah, so for the dividend growth portfolio, right
now we own 34 positions, solet's for argument's sake, call
it about.
Each one's a 3% position, notevery client.
When we're mathing out that 3%position is going to have all
round lots.
(12:18):
Right, there's going to be anodd lot in there, so we'll write
to the round lot.
But, yeah, we'll write thewhole position because we've
determined that one of theconditions is being met, or all
of the conditions are being met,that we're going to set a price
10% or higher for 60 to 90 daysand we're going to pull in over
(12:40):
that 60 to 90 days more than 50basis points or about a 2%
annualized yield.
If we wrote, you know, 90 daysfour times over the course of
the year, and typically whatwill happen is when we get you
know really excited and put anoption position on, all of those
criteria are being met andthey're being met in excess of
that.
So we've written you knowpositions where we're getting
(13:03):
more than 1% over a 60-dayperiod for maybe 15% up and we
say, okay, if the stock movesthat much in that time period,
maybe that's our sell disciplineand we're willing to get out of
it.
(13:26):
Cmt Chartered Market Technician.
So what we do factor in whenwe're looking at the option
positions is we'll look at RSIsand we'll look for overbought
positions, ideally, and so onethe stock's already had some
optimism on it.
We're going to take a stepbeyond that optimism to a level
we'd be willing to sell at, andwhat happens a lot of times is
maybe that stock's going to marktime and consolidate because
it's made a move at.
And what happens a lot of timesis maybe that stock's going to
mark time and consolidatebecause it's made a move higher
(13:48):
and what we will do is we willhave gotten compensated for
owning that stock while it'smarking time and consolidating a
position.
Steve Davenport (13:59):
That's good.
I know we have a little trouble.
Sometimes you just fall in lovewith the name.
My partner really loves Costcoand I like Costco, but Costco
just seemed to get so far aboveits moving average and outside
of its bands.
And I guess I want to say, doyou find it hard sometimes to be
(14:23):
in that position and be thatdisciplined?
Because sometimes you do kindof?
I always tell my partner thatwe date names, we don't marry
them, that we have arelationship for a period with a
name but we're not looking tosettle down with any name.
How do you feel about gettingin and out of names like that?
(14:47):
Do you find it hard to becompletely unbiased?
Joe Sroka (14:53):
I find it hard to be unbiased in what I'm going to
call core names.
Okay, so when we put theportfolio together, let's just
face it.
There's some names that youknow that you can own them for
10 and 20 years.
You know the Microsofts andWalmarts and Apples.
And we try not to be too cutewith ourselves where we say, oh
(15:16):
my God, you know Apple went up12%, let's get out of it,
Because we know, even if itpulls God, you know Apple went
up 12%, let's get out of it,Because we know, even if it
pulls back, you know it's a nameyou still want to own.
Right it's.
You know it's a high qualitycompany, it's been raising its
dividend.
Let's go back to the originalreason.
We own things in the portfolio.
Right, it's a high quality name, it's growing its revenue, it's
(15:37):
growing its cash flow, it'sgrowing its dividend.
Steve Davenport (15:41):
So, yeah, we do struggle a little bit of time
with a core position where wesay you know what, let's either
roll the option out and nowmaybe we've created a, you know,
120 day or 180 day cycle whereat some point along that line
(16:02):
the stock's going to pull backand then the option's going to
go off.
Yep, I mean, we had an advisorymeeting and somebody asked me
why I held Microsoft in ourglobal dividend strategy.
And they said well, you know,you're only getting paid 0.6 or
0.7%, why own it?
And I talked about dividendgrowth versus dividend and we
talked about the strength of thebrand, about dividend growth
(16:22):
versus dividend, and we talkedabout the strength of the brand.
And it's kind of hard to whenyou have 35 names and we have 40
names, you find it a littledifficult to get the yield when
you take one of those names.
That's well below the averagein yield.
Joe Sroka (16:37):
But you bring up an interesting point, and this is
now that we've been running thestrategy for over 10 years.
A little thing that maybe it'shard to communicate with clients
at the outset, but is theconcept of yield on cost.
So we have clients where webought Microsoft 10 years ago.
Steve Davenport (16:59):
Yeah.
Joe Sroka (17:00):
Okay, once again, it had a one-handle dividend yield.
It still has a one-handledividend yield, but the
dividends grown.
I don't have the exact numberin my head, but I mean it's
grown in excess of 10% a year.
And then what often we find isstocks trade at yield parity, or
(17:25):
what I phrase is, if you'resort of a 1.5% dividend yield,
you're always a 1.5% dividendyield, but you're growing your
dividend in excess of 10% a yearand your stock's going up in
excess of 10% a year, and sowhat you really wind up with is
capital appreciation accountsfor more of the total return of
the portfolio than the dividendyield.
(17:47):
But also you'll look back andsay, well, because the dividends
grown so much, you know I mayhave a 7, 10, 12% yield on my
original cost basis.
Right, and if you think aboutit, you know, for clients that
are eventually, you know growingwealth to retire or you know
(18:07):
going to use income in thefuture, we're reinvesting all
those dividends if money is notgoing out of the account and
compounding and then at the sametime, when you need to turn on
the spigot at the other end,we've grown the cashflow
potential of the portfolio overthat 10 plus year period so that
, relative to the originalprinciple you put into the
(18:29):
account, you're getting quitelucrative cash flow, instead of
saying I locked myself into a 3%yield for life.
Steve Davenport (18:41):
Correct.
I think it's great.
I mean I believe in it and Ithink it's great the way you've
implemented it.
Can you just talk to me alittle bit about NovoPoint and
what you think the value add is?
Or how do you look at it ifsomebody is on the street said,
hey, what is NovoPoint reallygreat at?
I mean, is it the customerservice?
Is it the returns?
(19:02):
Is it the risk management?
Like, what is it that you wouldcharacterize as your strength,
besides your good looks andpersonality that I know you and
Alan are more than gifted in?
If somebody wanted to not lookat your pictures, but wanted to
understand the firm I have aface for podcasting, steve.
Joe Sroka (19:26):
Come on.
The tagline that we have forNovaPoint which you know wasn't
dreamed up for marketingpurposes, dreamed up to be
genuine is experience,discipline and integrity, and I
really think we do bring that toclients.
Alan and I both hadinstitutional-level careers
(19:48):
before we opened a registeredinvestment advisory firm.
We are quite disciplined in ourinvestment approach but that's
because we're quite disciplinedin our personal lives.
As you mentioned, I'm a formerUS Army officer, west Point
graduate.
Alan's a triathlete which takesquite a bit of discipline, you
know, to accomplishIronman-level triathlete
(20:11):
performance.
So that same discipline that wehave in our lives was the same
discipline we bring into theinvesting.
And then integrity the last oneand I know in our modern world
integrity is sometimes a hollowbuzzword, but I've lived by the
West Point Honor Code my entirelife.
(20:32):
I believe it.
I share it with other people.
I want to have businesspartners that buy into that and,
yeah, we do treat our clientswith the utmost integrity, aside
from being a CFA or being afiduciary, because we're RIAs.
We tell people bad news whenthere's bad news to tell.
We tell people good news whenthere's good news to tell.
(20:52):
The way our investmentperformance works?
Is we do very well in volatileperiods of time?
Is we do very well in volatileperiods of time?
2018-19 was a good period oftime for us.
2022 was a good period of timefor us.
We've won a couple of awardsfrom the you know whatever
(21:17):
things that follow portfoliomanagers, and one of the things
we've won is what's referred toas a Bull Bear Award, where our
upside capture is very stellarrelative to our downside capture
.
That's great.
So what we're really doing iswe're trying to capture, you
(21:37):
know, 90 plus percent of themarket on the way up and you
know we're then tracking lessthan 70% on the way down, and
it's that combination,especially if you're going to be
, you know, a multi-yearinvestor.
As I said, we've been runningthe strategy for over a decade
that's really going to pay offover time is.
You know it's nice to own allthe hot, sexy stocks, but you
(21:58):
know a lot of times you'll runyourself off a cliff when you do
that.
Stoned all the hot, sexy stocks, but you know a lot of times
you'll run yourself off a cliffwhen you do that and, at the
same time, you don't want to ownonly boring.
You know.
You know low growth stocks.
So the ability to say I have aportfolio that can participate
well on the upside, even if itdoesn't get every last basis
point, but at the same time,knowing that I'm not going to
(22:18):
fall nearly as much on themarket when we go into these
typical rough periods whether itwas something we saw earlier
this year, you know.
Or, like I said, interest ratecycles from the Fed back in you
know 2018, you know when we hadthe inflation spike, you know
it's good to know that you havea portfolio that's durable
through cycles, and I thinkthat's really what we do because
(22:40):
of the discipline we can bedurable through cycles.
And then, just last thing, youknow, my one personal philosophy
is it's always the client'smoney.
So we do work with our clients.
You know two ways.
That I think is somewhat unique.
As much as you know, we'rerunning set strategies.
We will accommodate clientsindividual wishes.
(23:04):
We have some clients that youknow.
I love this, joe, but I'm notowning any oil stocks, I'm not
owning any defense stocks, etcetera.
Or we also have the um.
You know, I think like Teslawas a good example.
Um, dividend growth I get itSounds good, but I'm a Tesla
fanatic and I own some of thatin the same account and we'll do
(23:24):
carve outs.
And we have a sophisticatedenough portfolio management
system that we can run the restof the strategy around some
clients' individual wishes,because at the end of the day,
like I said, it's their money.
Steve Davenport (23:37):
Correct.
I think that's great because Ithink that a lot of us CFAs and
some people in the industry justsay well, if it's our best
thinking, everybody needs tohave our best thinking and I
think that our best thinking isimportant.
But it's also important that youget the right behavior from
clients and if you get clientbuy-in to the names, then that
(23:58):
buy-in means they'll probablybehave better in a down market
or they'll behave better incertain situations and
ultimately, I think we bothrealize and you can disagree if
you want but I think behavior ofour clients is the main thing.
We're trying to manage.
The returns I think will comeand go based on some periodicity
(24:20):
, but how clients behave andfeel about their portfolio.
I mean I've become more of abehavioral investor than I have
been a quant investor, because Ireally think that there is a
portfolio out there that youfeel good about and if you feel
good about it, you feel goodabout the advisor who's doing
(24:41):
the diligent work you're likelyto be a better you know a better
client on the long end and havebetter results.
Joe Sroka (24:50):
Yeah, and I think the thing that we concentrate on
with risk management is we usesome of the you know off the
shelf software as a service risksoftware, and we will.
We have the clients take thebehavioral risk questionnaire at
the beginning of therelationship and then every time
(25:10):
there may be a significantchange in life you know I'm now
retiring, okay, well, how is myrisk need to shift or how's my
perception of risk need to shift?
And then we try to manage theportfolio Because, as I said, we
can stack, we can have dividendgrowth, we can have more
growthy names, we can haveutilities, we can have REITs, we
can have fixed income and wemanage to the risk number for
(25:34):
the client.
So when you're managing to therisk number like that, it's okay
to say you're going to have oneor two speculative positions
that are important to you andthat's also good because it
keeps the clients engaged oninvesting.
But then as long as we'redialing the overall portfolio
risk into the range that suitsthe client's risk tolerance,
(25:56):
then I feel we're doing a goodthing and we're really working
as partners.
Steve Davenport (25:59):
Yeah, that's great.
I mean, I think one of thethings I've noticed about
NovaPoint is the integrity part.
I think you guys take yourintegrity seriously and you take
your clients and therelationship very seriously and
you apply you know, as you do inyour own lives a great deal of
discipline and care and care.
(26:25):
And one of the things I'vealways been interested in is
your commitment to vets and themilitary, kind of compassionate
capitalism.
Can you talk a little bit aboutwhat your firm does to try to,
you know, give back, Because Ithink that giving to your
clients is one thing but alsogiving broader to the community,
I think, sets another, you know, level of commitment.
Joe Sroka (26:48):
Yeah, so I'm glad you mentioned that.
So we do a couple of things.
When we first started the firm,I said you know we, you know we
should be charitable inclined.
We're, you know, making moneyout in the economy.
We should figure out a way tochannel some of it to things
that we care about.
So, as you mentioned, I'm aveteran.
(27:09):
Alan's son is an Army veteran aswell.
That was one of the firstaffinity points that struck up
between Alan and I when we metand we said well, we all in our
families ourselves or ourselvesor our families are involved
with veterans, so let's figureout ways to help veterans.
So we sort of came up with youknow, maybe it's a bit gimmicky,
(27:31):
but we said you know what aresort of two important days in
the year, and one of them isVeterans Day and the other one's
Memorial Day.
They have distinct purposes,you know, one is for people that
we've lost and one is for allveterans.
But we said that's probably agood time to, you know,
celebrate what we care about.
So we make donations roughlyevery six months because it
(27:54):
winds up being May and Novemberto several different veteran
charities that we care about.
That, you know, in many caseswe're personally involved with,
and I'll give you an example.
One of them that we've, youknow, given to you now for 10
straight years is Children ofFallen Patriots, a phenomenal
organization that providescollege scholarships to the
(28:18):
children of, you know, soldiers,sailors, airmen that have lost
their lives in the global war onterror.
Steve Davenport (28:27):
That's great.
Joe Sroka (28:29):
That I have a personal affinity to that.
That organization was foundedand is run by one of my West
Point classmates and his wife,so I know the people that are
running it personally.
You talk about integrity anddiscipline.
It's someone that and you knowthis is important in nonprofits
we're giving money to anonprofit to deploy and we trust
(28:51):
the people that run thatnonprofit right, so that
integrity chain moves the wholeway.
We also do things locally.
We're supporters of WreathsAcross America.
That goes to the VeteransCemetery in Canton, georgia,
every December.
So again, you know, makingimpact local.
(29:11):
And then I personally, I have avolunteer job outside of my job
at Nova Point.
I'm the treasurer for the USArmy Ranger Association and
that's a national organization.
We have 10 regions around thecountry and we provide financial
assistance to rangers and theirfamilies if they need it.
(29:34):
We provide scholarships tochildren of Army Rangers and we
provide, you know, connectingevents, you know, in the
different regions for rangers tolink up, ranger veterans to
link up, you know, and have acommunity.
The sort of tagline for theorganization is, you know,
(29:56):
connecting Army Rangers past,present and future.
And that's what we really do.
We've everything from World WarTwo Rangers up to Global War on
Terror Rangers and we'vecreated a community for them and
, you know, work to financiallyenable that community.
Steve Davenport (30:12):
That's great.
I mean I think that what you'redoing is inspiring and I think
it's great for others to see.
I mean I'll try to include ifyou send me those URLs'll
probably put them in thetranscript so that people can
check them out when they checkout the podcast I think, that's
great.
Um, one question we ask a lot ofour guests and just um, it's
(30:36):
kind of I mean, this is probablythe last question is how, how
do you get experience with moneyand do you have anything in
your money story that if youcould say to Joe, who's 20, joe,
here's what you learned andyou'd like somebody who comes
(30:57):
behind you to try to dodifferently?
Can you just give us a littletaste?
Did your family talk aboutmoney when you were growing up?
Did you?
Did you have a kind of tabootopics that you, you wanted to
leave dinner in one piece?
So you, you talked about thingsthis way, or you?
You know, I know that familydinner tables and ideas about
(31:20):
money can be somewhat difficultto get through.
Joe Sroka (31:27):
Yeah, so I grew up in New Jersey.
My father, well, you know, farfrom a wealthy man, he had not
even been a high school graduate, he was a bartender in New York
City.
He was actually a fairly famousbartender in New York City.
There's New York Times storiesabout him at the Algonquin Hotel
(31:50):
in New York, which is fairlyfamous.
So he's a well-known bartender.
But even if you're a well-knownbartender, that's a lot
different in Midtown thanworking downtown on Wall Street.
And then my mother was a schoolnurse.
So I grew up, you know I'm goingto call it fairly humble
backgrounds.
We weren't, you know, destituteor anything.
But you know, I think what myparents did instill in me
(32:15):
everything from sort of the, youknow, mowing lawns and washing
cars.
You know, when you're ateenager and getting a job, I
think I've always, just, youknow, been inspired by them to
work and contribute, and I'mvery happy.
I have two daughters.
They have a lot betterfinancial education than I had
(32:37):
starting out because I'm theirdad.
So you know, I've gotten theminterested in understanding.
You know, why do you own thisstock or that stock in your
account?
And my younger daughter is theone that's taken to it a little
bit more.
She has selected some of thestocks for her account.
So when you get to the makingaccommodations for clients that
(33:00):
you know really care about onestock.
With my daughter we do the samething.
We own some of the stocks thatI think are good for her and she
owns some of the stocks thatshe thinks is good for her.
But she hasn't done bad.
Steve Davenport (33:13):
No, my son and I do the same thing and I think
it's one of the best parts ofour relationship is that he
really does care about.
He just sent me a text theother day.
He says have you thought aboutany investments in the nuclear
area?
And I was like, oh boy, youknow, like my clients don't send
(33:35):
me questions like that, but hedoes, you know.
Joe Sroka (33:39):
That's a great dialogue to have and whether
it's the dialogue I have with myown daughters or the dialogue
we have with clients, I thinkpeople being engaged in the
thought of investing it does acouple of things for them.
One, it makes the relationshipwith the money manager real.
This person is really workingon my behalf because I'm
(34:02):
actually seeing what they'redoing and I'm learning about the
names that they're buying.
But second, in some situationsit keeps folks from getting
ripped off.
My biggest I don't know disgustabout the industry that we're
in is there are plenty ofunscrupulous people and there
(34:23):
are plenty of people that don'tbelieve it's the client's money,
as we found out over time.
And you know I try to, you know, hopefully steer people away
from those situations and we'reglad that everyone that works
with us you know, like I said,we're good fiduciaries.
We think we're, you know,treating them with the utmost
integrity and we're trying toprovide an education element
(34:47):
that really binds them to us sothat they can have a good
experience and a good financialfuture.
Steve Davenport (34:53):
Unfortunately, my son's also very good at
looking back with regret andhe's reminded me about the
Bitcoin at $20,000 that wedidn't buy, about the Bitcoin at
20,000 that we didn't buy, andI've told him I still don't
understand how the value isdetermined, so I'm not going to
buy it.
And he's mentioned somethingabout my age and my mental
(35:16):
abilities, but I'm not going toprobably go through it in detail
, but I think that you have todiscuss some of the things that
don't you know.
I mean, yes, I said to him ifyou want to take a flyer and
take a certain percent and putit in there, knock yourself out,
but I'm not.
You know what I mean.
I'm not in agreement and and Ithink it's um, you know, I mean
(35:41):
the there's, there's there'slots of different colors in the
world and everybody kind ofgravitates towards different
names and different things.
And I think at his age, maybeyou know Bitcoin is a good
lesson or maybe there'ssomething there that's going to
help him further down the line.
But that's the one regretinvestment we've had.
(36:01):
But he's had some good luckwith NVIDIA and Microsoft and
Oracle.
He's a very tech-orientedinvestor and so now he's
thinking about broadening andhaving a little bit of gold and
having some other things.
So I think it's great justbecause I believe that when I
(36:22):
was growing up, we didn't reallytalk about you know what, how
much money you should save andhow much, how much should you
spend and you know what.
And I think that now, havingthose discussions, you realize
that it does make everyone youknow what I mean.
It's it's not a comfortabletopic, but the fact that you're
having it in means feels likeit's a deeper and better
(36:47):
relationship.
Joe Sroka (36:48):
Yeah, I think any form of communication you have
with your kids is great, whetherit's around sports, whether
it's around investing, whetherit's around different activities
.
Graduated from college thispast year, when she graduated
from high school, we bought herseveral hundred dollars of
(37:10):
Bitcoin as her high schoolgraduation present and she still
owns it and she's quite happy.
But she also owns, you know,microsoft and Walmart and some
other things in her investmentaccount.
So, again, it's a good balanceand keeps her engaged and, you
know, sort of always welcomesthe mind to new ideas.
You know there's anintellectual capital, business
and intellectual capital can'tbe stale.
You have to continually readand learn and, you know, be open
(37:35):
to new ideas and evolve.
Evolve is a good word.
A good word, yes.
Steve Davenport (37:38):
Okay, I mean this is evolving, so I'd like to
wrap up.
I mean this is evolving, so I'dlike to wrap up.
What final?
Joe Sroka (37:52):
comments.
Do you have Anything, Joe,about the business or personnel
lead or you're?
Steve Davenport (37:54):
involved.
How satisfied are you when youdo things with the volunteering?
It seems like you do a lot ofvolunteering, so you must feel a
certain affinity or joy you'regetting from those things.
Joe Sroka (38:05):
Yeah, I'm a big believer and you know I've done
different things over my life.
You know, for those familiarwith, you know, atlanta, you
know, when my daughters wereyoung, I, you know, coached
soccer at Top Hat, even though Ididn't know anything about
soccer.
But at their age it reallydidn't make a difference.
But you know, I think you knowwe have, you know, resources
(38:27):
that are finite, right, you knowmoney is a finite resource,
time is a finite resource, andyou know we can contribute our
time and we can contribute ourmoney to different things.
You might as well contributethem to things that you enjoy,
where you make an impact, thatyou get satisfaction back from.
So, whether it's, like youmentioned, charitable giving to
(38:47):
veterans organizations or, youknow, doing things in the local
community, it's important to dothings that you feel you're
making an impact.
I think the biggest problem,you know maybe nonprofit
organizations and otherorganizations that rely on
volunteers if it's not a goodexperience for the volunteer,
they're going to stopvolunteering, you know.
(39:08):
So I think being involved inorganizations that you identify
with, you believe in and you getsatisfaction from working with
goes a long way to keepingpeople engaged, and then the
longer people are engaged, thebetter the impact is.
Steve Davenport (39:23):
That's great.
Thank you, joe.
So, listeners, I appreciate youlistening and we'd love you to
like and share Skeptic's Guide,and if you have any comments,
please reach out and we'll tryto put some of the things that
Joe's involved with in our notes.
So check it out and pleaselisten.
(39:44):
We got some great guests comingup, so thank you everybody and
have a great day.
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