Equities

One of the most important qualities of an equity portfolio is to protect investors from the risk of loss of purchasing power. Stockholders are owners of a company which entitles them to participate in a business’s success. True business owners typically care less about the price for which they can sell their company than about the amount of profit that can be earned and the growth that can be achieved. Ultimately, the market will recognize a business’s value, but in the interim, owners can be rewarded with dividends received. Companies are dynamic entities that are able to adjust to changing conditions. The process of creative destruction compels companies to reinvent themselves if they are to successfully defend against the unrelenting forces of competition.

Investment Process 

• Our stock selection process is sell target driven. By knowing when to sell, our purchase decisions become much easier. We believe that this is a significant advantage vis-a-vis investors who focus only on which stocks to buy.
• Companies in our universe typically are financially sound and have a long operating history..
• Each company’s financials are normalized for temporary or cyclical conditions and are projected far enough into the future to look beyond where most investors focus in order to negate emotional trading and noise.
•  Our normalized earnings projections are what we believe can reasonably be achieved, rather than being corporate goals or “hoped for” results.
• We separate the analysis of normalized earnings from our valuation analysis in order to minimize any biases when calculating sell targets.
• We employ a disciplined, objective process where stocks are ranked from most to least attractive.

Risk Management

• Maximum position size is 4% at cost and 7% at market. Positions are reduced automatically if they exceed 7% of the portfolio. 
• Sell targets are sacrosanct. While tax efficiency is important, economic decisions will take precedence.
• While all portfolio holdings are reviewed regularly, underperforming stocks receive increased attention to insure that our normalized earnings projections are valid.
•  Portfolios are concentrated enough to insure that each holding has a material impact on performance, but diversified enough so that any one position or sector will not jeopardize performance.
  
  

  Most attractive investments are found in the Value/Core zone