EQUITY INVESTMENT APPROACH
"We are growth managers sensitive to relative valuation"
Our Investment Approach
Is based primarily on growth and valuation and the flexibility to adapt to changing market environments as determined by investor psychology and the economic cycle.
Our Investment Strategy
Is internally formulated as are the majority of our portfolio ideas. We gather news and analysis from various economic services from which we extract a “top down” blueprint of the economy, identifying strong and weak sectors. We seek to anticipate rather than react to economic and market developments.
Our Stock Universe
Is selected on the basis of a variety of growth, economic valuation and financial criteria. This universe is further refined by reviewing financials, operating strategies, management and technical analysis. We are particularly attracted to companies with strong cash flow, growth, solid balance sheets, appropriate leverage and favorable industry position. We are concerned with valuation, both absolute and relative, and build disciplines into the selection process to avoid frothy and speculative market areas.
ESG
We believe companies that have a positive impact on our society are often good long-term investments. We like companies that strive to be good corporate citizens and “do the right thing” – by their workers, their customers, the environment, their communities, and their shareholders too. As part of our investment process, we seek companies using ESG principles and approaches, and those adding value through sustainable practices.
Our Investment Style
Is sufficiently adaptable to market conditions so that, when necessary, we can implement defensive strategies and anticipate the business cycle. We endeavor to avoid being mired in a rigid investment style that would be a disadvantage in adapting to rapidly changing markets.
Portfolios are Diversified
Among 40-50 issues. Industry groups may be overweighted or underweighted based on our assessment of the economy and investor psychology. We seek opportunity everywhere and are not restricted to industry groups or company size. The investment universe includes special situations, such as, underfollowed, under-owned investments whose fortunes are believed to be changing in some significant way. We are not market timers, technicians or price momentum players. We work to take advantage of changes in sector rotation and instances of undervaluation. Fundamental company analysis remains our primary investment selection methodology. When we balance portfolios to meet asset allocation and sector weighting goals, we may supplement individual equities and bonds with mutual funds and/or ETFs to achieve broader diversification.
Stock Characteristics
We search for superior companies with strong fundamental characteristics. A company’s products and industry are analyzed along with its growth profile, operations, financials, management and financial ratios. We like companies with a defendable niche and enjoy a sustainable competitive advantage? Companies that have shown 3 to 5+ years of strong earnings, above average return on shareholders equity and improving profit margins also attract us. How much does the company need to spend to maintain current operations? Companies with modest capital needs and the freedom to adjust prices for inflation are important equity characteristics. We appreciate effective management too. How good are they at expanding operations, reinvesting in future growth opportunities, making smart acquisitions, or repurchasing shares? We like companies that can fund their own growth. Companies with low debt levels and those that have abundant free cash flow meet that criteria. Companies that have an attractive valuation relative to their growth rate, their peers and historic ratios are companies we seek out.