Investment Sponsor Spotlight: Sapphire Star Capital
By: Dana Udumulla
Key Points
- Sapphire Star Capital is an SEC Registered Investment Advisor that mostly operates as an institutional manager.
- Chief Executive Officer and Chief Investment Officer Michael J. Borgen developed Sapphire Star Partners in 2015. It derived from a lifelong zeal of economics and the peculiarities accompanying the financial realm.
- Michael Borgen and partner Meghan Chicoine are proud of their unique investment offerings including Sapphire Star Partners Fund – a long-short equity hedge fund - and Sapphire Star Partners Concentrated Stock Fund.
Sapphire Star Capital’s investment management team may just be the tortoise that wins the race. Owner Michael J. Borgen and partner Meghan Chicoine focus on the underdogs that tend to be overlooked and undervalued in the mainstream investment sphere. The lack of attention placed on these prospects grants Sapphire a golden window of opportunity, allowing them to seize an opening the instant they’re ready for reaping. Let’s delve into Sapphire Star Capital and discover just how they continuously achieve their objective.
Following a Fervency
For Michael, a seed of curiosity was planted during his high school years. He opted to take an economics class, and immediately became fascinated by the subject. As he learned more, he began to observe his parents and how they handled their finances. He realized his parents didn’t have a particularly strong understanding of economics, let alone the specificities affiliated with financial accounts they held, including their 401(k)s. After digging deeper, he formed the belief that one of the most important practices you can inhabit is to save and invest for your inevitable retirement.
He ventured off to college at University of Nevada, majoring in finance with a minor in economics. During his undergrad period, special guest Louis Navellier (Chairman and Founder of Navellier & Associates) gave a presentation. Michael was greatly intrigued by his perspective on investing and the market. After his presentation, Michael was fortunate enough to hold a conversation with Navellier, which resulted in an internship offer.
It wasn’t long before Navellier offered Michael a full-time position that lasted 20 years. Under his mentorship, Michael further expanded his knowledge on investing in stocks. He left to create Sapphire Star Capital, and Navellier positioned himself as their first client – and remains one of the largest to date.
The Thought Process of Sapphire Star Capital
Potential risk mitigation and management are at the forefront of Sapphire Star Capital’s ethos. Their investment approach consists of a three-step process, involving quantitative screening, risk mitigation through fundamental analysis, and portfolio construction utilizing their distinctive methodology.
They begin by employing the financial metric known as the reward-to-risk ratio, which assesses the potential return of the respective investment, relative to its risk. This is generally determined by dividing the expected return of an investment by the amount of risk taken to receive that return. In this circumstance, the reward-to-risk ratio is a stock’s alpha over a trailing 52 week, divided by the stock standard deviation or risk over that same period.
Based on this attribute, they then take those that top at 25% and apply it to a fundamental stock selection model. This is because there are a variety of possible reasons that can surface for why a stock might rise in price. The plan is to venture towards stocks that have great risk adjusted alphas and ensure that they have strong sales growth as well as strong earnings growth.
As far as portfolio construction is concerned, they essentially optimize a portfolio so that it has the highest projected return for the lowest projected volatility. They habitually monitor the universe of stocks on a weekly basis and tend to maintain a portfolio turnover of about 30-35% per year.
Keeping Up with the Trends
As value stocks and growth stocks tend to move in decade-long trends, Michael can attest that there has been a resurgence of value stocks.
Growth stocks are shares of companies typically expected to have higher than average earnings growth. Value stocks are company shares considered to hold below average earnings growth and below average valuation characteristics, which leads them to be less expensive than gross stocks. This may be a result of economic recovery, inflation concerns, interest rate expectations, among other qualifying factors, which Sapphire Star Capital considers during the investment decision-making process.
Sapphire Star Capital’s Exceptional Offerings
Sapphire Star Capital has two private funds available for prospective investors. Sapphire Star Partners Fund has been up and running for over nine years and is their very first long-short equity hedge fund. It stands as a culmination of all their different investing strategies. As they work with Small Cap and Mid Cap, Covered Call, and U.S. Equity Growth strategy, they’ve managed to combine them into a more tactical portfolio that they’re capable of hedging.
This past January, they launched the Sapphire Star Partners Concentrated Stock Fund, which was developed for specific investors who have low-cost basis concentrated positions in a long-term holding. For newer investors, concentrated stock funds generally invest in a relatively small number of individual stocks, focusing on a limited number of companies. These funds are actively managed, and Sapphire Star Capital implements their decisions according to the companies’ analysis, industry trends, and market conditions.
Sapphire Star Partners Concentrated Fund invests in stocks that align with their convictions and showcase evidence of attractive valuation and strong growth potential. These respective stocks also carry the potential for high returns, especially if they outperform the broader market.
Finding Fulfillment
Sapphire Star Capital has gladly embraced its success. They resonate with practicing discipline and sustaining a steady and controlled approach towards their investments. They value being able to offer their clients various options on the day they choose to retire. Michael and Meghan both aspire to give their trusting clients the freedom and flexibility to do what they want with their lives.
Previously, one of their clients invested in Sapphire Star Partners Fund. Since the assets in the portfolio accumulated exponentially, the client was able to fund one of his passion projects – a biotech firm producing medicine centered on Alzheimer’s. Because of his involvement with the private fund, he could provide the necessary resources for its research. Sapphire Star Capital feels the purpose of investing is to improve people’s lives in a plethora of ways aside from financial appreciation. This mantra pours into their everyday work ethic.
Sapphire Star Capital: A Living Demonstration of Diligence & Dedication
Motivated by ardor, Sapphire Star Capital has backed their overall mission with consistent and ample action. Michael and Meghan are both looking to broaden their team so they can remain to provide extraordinary customer service while their invested assets simultaneously further appreciate. With pockets of investors across the country in regions like Boston, Denver, California, Alabama, and Texas, Sapphire is eager to mark more territories with their investing triumphs.
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This content is for educational purposes only and is not an endorsement.
Past performance does not guarantee future results. Private fund investments are only suitable for Qualified Investors, who are familiar with and willing to accept the high risk associated with private investments.
