Customization: We believe that each client is unique. Clients have different investment goals and objectives. There are several key areas in which clients differ:
- Risk tolerance: Is the client more interested in capital preservation or more growth that may be achieved by investing in higher-risk securities?
- Return requirements: What rate of return is the client desiring or requiring? Is the client more focused on income (stock dividends and bond interest income), or on capital gains that allow for tax-deferral?
- Tax considerations: Examples: What is the client’s tax bracket? Are municipal bonds suitable for the client?
- Liquidity requirements: How much cash do you desire to have set aside in case of emergencies or for the upcoming purchase of large items such as a home or a car?
- Legal considerations: Is this a trust account with current beneficiaries and future beneficiaries whose interests must be balanced? Is the account a traditional IRA subject to mandatory required distributions?)
- Special considerations: Examples: College funding. Children with large medical expenses due to physical or mental challenges. Client works for an arm of the Federal government, such as the FDA, whose investment choices are restricted by regulation.
Conservative: We use a conservative investment philosophy that matches your investment objectives with the current outlook for the stock and bond markets.
Style Rotation: We believe that neither the growth nor the value styles of stock market investing is capable of sustained year-in, year-out superiority in generating above-average investment returns with the minimum of risk. As a result, we believe that focusing on growth stocks in certain market environments and value stocks in other market environments will result in above-average investment returns with less risk to you. We prefer purchasing growth stocks at value prices…the best of all possible worlds.
Combination of Top-Down and Bottom-Up Stock Selection: We take a top-down approach to investing in stocks. We analyze the economic environment and draw conclusions concerning which industry sectors appear to offer the most near-term appeal. After industry weightings are determined, we then select stocks in each industry group that appear to offer the most attractive investment return with the least amount of risk. In the stock market, we look for companies whose management team has a proven track record of superior performance and whose earnings have shown a steady, above-average rate of growth. We look for stocks whose valuation suggests that they have significant upside potential with limited downside risk. Occasionally, for investors for whom such an investment is appropriate, we will invest in stocks that hold promise of significant gains, but whose valuation is more expensive than the average stock.
Focus on Domestic Stocks: The US economy has traditionally produced the most vibrant and dynamic companies in which to invest due to the entrepreneurial spirit of the people, political stability and a long tradition of protecting property rights. Particularly for investors who live in the US, investing in stocks whose companies are headquartered in the US, and foreign companies with a large US presence, makes sense. Investing in international stocks has a variety of hazards that may not be anticipated by US investors, including the risk of loss due to currency devaluation, language differences, a less robust accounting system, confiscation of private company resources by government, the implementation of poor fiscal policies, and political risks. Accordingly, we feel that a US investor should look primarily to companies domiciled in the US or whose operations have a large US component. Our international investments tend to be on the conservative side.
Focus on Large Cap and Mid Cap Stocks: We believe that investing in large- and medium-sized established companies carries less risk than investing in small, unproven companies. We focus on companies that have strong finances (limited debt), established products and markets, and strong growth in earnings and cash flows. We also invest in value stocks where the risk profile of the company does not appear to be excessive. We may also
· uncover a unique opportunity to invest in a company with turn-around potential
· invest in an individual company whose market value would place it in the small cap area of the stock market but has a record of profitability or a unique product with a large growth potential and/or has a good track record of providing dividend income to stockholders
· use specialty mutual funds for stocks that fall outside of the large and mid cap range if the valuation of stocks in these other areas of the stock market is unusually compelling, and to improve diversification of your portfolio
Individual Stocks: We believe that investors should have the ability to determine their own destiny in terms of when to take capital gains and losses. This is not possible when your primary investments are mutual funds, where the fund managers, are not investing to meet your objectives; rather, their goal is to outperform relative to a benchmark index.
Mutual Funds…Buying the Best: Although we primarily invest in individual stocks, when our economic and stock market outlook suggests that investing in small cap, specific industry sectors or international investments is appropriate, we will select the best of the best in terms of specialty mutual funds. Since we do not manage our own mutual funds, we have no bias towards one mutual fund family over others. We are independent and objective in our selection of mutual funds. We only buy no-load mutual funds, and only when it appears appropriate to do so.
Bond Portfolio Management: We believe in buying bonds of high quality (Baa or better). On rare occasions, it may make sense to invest in the lower-quality bonds. In these limited circumstances, we use mutual funds to ensure proper diversification.
Trend Setters: We are not trend followers. We believe that the best way to minimize risk and maximize the growth in your portfolio is to avoid chasing the “hottest” sector of the market or to engage in so-called earnings and price momentum strategies. We would rather buy a stock before it has become overvalued. This strategy is the best way to buy low and sell high.
Dynamic, Active Management: We believe that long-term investing is not the same as a static stock, bond and cash mix. Rather, the asset mix used in your account should change as our outlook for the economy and the capital markets changes. However, as long as a stock or bond is fundamentally sound and is not overvalued, it should generally be retained. We do not believe in trading just for the sake of showing activity in your account. We also believe that this is a stock market that favors active investing rather than using index funds.
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