Equity investment strategy

Our goal is to grow our client’s financial assets by purchasing companies we believe are undervalued.  This approach serves a dual purpose. We believe buying undervalued assets is the best path to preserve our client’s investment, while also providing for above average capital appreciation.

Valuing a prospect company is where we start.  We estimate value through an appraisal process that provides a fair value estimate for each company.  We use a relative value approach – a bottom-up process that incorporates the assessment of a company’s growth prospects, market position, financial profile and risks to estimate an appropriate valuation.  While we use most common valuation metrics, most of our appraisals are determined using cash flow.  We use research provided by brokerage firms, but conduct our own analysis before purchasing a position.

Valuation estimates provide the framework for our investment decisions.  We believe focusing on valuations provides a margin of safety for long term investors, instills investment discipline and helps remove emotion-induced moves that can result in “buying high and selling low.” 

We are investors, not traders, and have a long term outlook when taking a position in a company.  We will sell positions if we believe a company is fully valued, there is an adverse change in our risk/reward outlook, the positions becomes oversized or we want to take advantage of another compelling opportunity.  We are tax aware and strive to make gains long term in taxable accounts and will use tax losses to minimize gains if possible.

Portfolios are diversified from an industry and company specific level and typically hold approximately 40 positions.  We do not attempt to mimic the S&P 500 or any other index and typically have a sector/industry bias because of our valuation focus.

We invest primarily in individual companies.  Most of our core investments reside in the large cap category due to our focus on cash flows, balance sheets and market position.  We use mutual funds for our international and small cap investments.

Portfolio strategy

• Portfolios will generally be diversified from both an industry and company-specific level and will generally hold approximately 40 companies.
• We take a long-term view and expect to hold positions until the perceived value is realized.

Fixed income

• Sector Diversification – We diversify across sectors within the taxable and tax-free markets and over- or under-weight those sectors based on how we believe they will perform given the outlook on interest rates and the economy.
• Duration Management – Adjust duration as needed to take advantage of shifts in the yield curve. We generally stay within two years of the benchmark.
• Yield Curve Analysis – We strive to find securities trading at the best value at each point along the yield curve.

The portfolios are also designed to hedge against inflation, interest rate and credit risks. In general, we purchase investment grade securities, including taxable bonds (corporates, mortgage and asset-backed, agencies, and treasuries), municipal bonds, and preferred stocks. We will also use closed-end funds, mutual funds, and ETFs to gain exposure to areas where we don’t have expertise (international bonds, floating rate loans, and high yield corporates) and to provide added liquidity.

The investment strategies outlined above are applied to our discretionary, fee based, managed accounts. Each account is actively managed and tailored to client needs regarding income, risk tolerance, time horizon, taxes or any other limitations in regard to sector allocation, duration, maturity, or credit quality.