Hyper focus on cash earns firm potential payday

A Sarasota-based four-person money management firm has notched a notable accomplishment in being selected by Fidelity Investments to provide online research for clients.

The firm, McLean Capital Management, is one of four out of 3,500 firms Fidelity considered and evaluated. The other three firms selected are industry powers. “I'm very excited that we will have the opportunity to have Fidelity as a partner,” says Richard McLean, founder and CEO of the firm and a sister entity, CashFlow Statement 101. “The credibility will take us to the next level tenfold.”

McLean Capital has about 200 clients and a portfolio McLean calls “almost invisible.” But he says the firm's niche — providing clients a decades-deep cash flow analysis of every publicly traded company — is what attracted Fidelity, which has $1.7 trillion in assets under management. The focus on cash over earnings, says McLean, stems from the old Wall Street saying: Earnings are opinion, cash flow is fact.

In other words, McLean, who has been in the investment industry for 39 years, says earnings reports that move stocks are based on projections and speculations. Cash flow, though, is what moves companies to success or failure. “It's a more common sense way to invest,” McLean tells Coffee Talk. “We're not the only way to win, but when it comes to risk-adjusted investing, it makes sense to do it with a company with good cash flow.”

The partnership with Boston-based Fidelity will begin by the end of the year, when McLean's services will be on Fidelity's website. Although he looks forward to the partnership, the approval process was nonetheless grueling. In fact, McLean says he spoke with Fidelity for more than a year.

“We've been vetted by other companies,” McLean says, “but Fidelity is by far the most thorough and complete.”