We are passionate about finding the best investments for you, understanding that this process involves both art and science. Through our rigorous research and collaborative approach, we seek opportunities for equity investing that offer consistent earnings. We assist you in establishing a growth expectation and maintain an appropriate level of risk in our Investment Implementation. When the situation involves fixed income investing, we purchase bonds for income and lower price volatility, taking advantage of market inefficiencies through a disciplined selection process.
Equity Investing
We research individual companies that offer the greatest opportunity for real growth in cash flow and consistent earnings.
We focus on companies with the following characteristics:
- Superior management
- Strong financial condition
- Inflation-adjusted growth of cash flow, unit sales, earnings and dividends
- Strongly competitive position in a growing industry
Research and Analysis
Our research team begins by collecting, organizing and evaluating financial and economic data, and assessing its investment significance.
Research sources include:
- Direct company contact
- Wall Street research
- Financial publications
- Statistical sources
- Providers of data and analysis tailored to our specific needs
Various screens are used to focus our selection of equity and fixed income instruments on those most attractive for clients’ portfolios. Our valuation research produces a list of 50-75 securities of the highest quality in terms of pure investment merits. We purchase securities for the long term and apply established disciplines to determine if and when replacements are necessary.
Determination of Fair Market Value
The team works to determine a fair price to pay for each security. Two factors govern this assessment:
1) The Clifford Swan valuation model, which assesses the real growth of the underlying company.
2) Our collective judgment regarding the current business environment for the company. All companies have life cycles. We evaluate management’s ability to perpetuate that growth cycle beyond market expectations.
We establish a fair market value for share price by combining our analysis of expected growth rate with an assessment of the company’s ability to extend the life of its growth phase.
Constructing Individual Portfolios
From the group of 50-75 outstanding investments, each counselor constructs portfolios suitable for their individual clients. Portfolios are prudently diversified in terms of individual securities and economic sector weightings.
Monitoring Individual Portfolios
Any stock is a candidate for sale if we perceive deteriorating company or industry fundamentals or the stock is becoming substantially overvalued. We also do not let a single stock that has done well create an imbalance in a portfolio. We will reduce the size of a position and reinvest the proceeds in more attractive stocks.
Fixed-Income Investing
We purchase bonds for income and lower price volatility, purchasing primarily "investment grade" fixed income issues. We take advantage of market inefficiencies through a disciplined selection process. Non-Treasury issues purchased for portfolios must provide a sufficient yield advantage to justify the increased risk.
We focus on intermediate issues to minimize the potential price volatility of long-term bonds. We calculate the risk/return trade-off for alternative duration choices to maximize returns for a given level of risk.
A bond may be sold when, in our judgment:
- Its yield spread narrows versus alternatives with comparable risk
- The sector’s fundamental attractiveness declines
- Downgrade potential is increasing
- A bond with greater appreciation potential is identified
Investment Implementation
An important part of our role is to assist you in establishing a growth expectation and maintain an appropriate level of investment risk. Expected returns are commensurate with the risk assumed.
When setting risk targets, we consider your special circumstances, including the following factors:
- Preservation of principal in real terms -- e.g., adjusted for inflation
- Level of current income needed
- Tax considerations
- Any legal constraints
- Minimum liquidity requirements
- Acceptable level of volatility
- Client’s time horizon
- Unique circumstances
With these considerations in mind, we construct and monitor portfolios tailored to your needs. As your circumstances change over time, we adjust the portfolios to meet the new objectives.
