|
 Our
style is opportunistic growth. Within
domestic equities, stock selection has more correlation to adding
value than any other criteria. Therefore, our primary source of
value add is bottom up stock selection.
Security Selection Process
Our bias is entirely toward growth stocks. Financial
momentum is critical to the market's valuation of a stock. We examine
this momentum from several perspectives:
- strength of balance sheet
- strength of relative cash flow multiple
- earnings/market share/sales growth
- number of growth avenues (minimum two)
A total universe of 350 stocks is followed, 150 closely.
This universe changes over time.
- 40 — 60 buy list securities in equity portfolios at any
given time
- companies are dropped or added based on performance, IPO's,
management changes or other developments
Sector/Industry Weightings
Security selection for the most part drives sector
weights. Although our portfolios are never indexed and no predetermined
sector weights are established, these general sector guidelines
are observed:
- minimum (0x) and maximum (3x) sector weights
- 8 to 14 sectors represented in the portfolio
Portfolio Construction
Typical equity portfolio guidelines:
| Diversification |
Range |
| Number of holdings |
|
| Core/key positions (larger/long-term) |
25 — 35 securities |
| Trading (smaller/highly liquid/short-term) |
10 — 30 securities |
| Maximum holding of one company at cost (Increased if capital
appreciation warrants) |
5% |
| Minimum holding of one company at cost |
0.5% |
| Cash position |
0 — 40% |
| Maximum holding of any single corporation's annual trading
volume |
20% |
Positions are scaled in or out over time to allow
for optimal bid—ask spreads.
| Capitalization |
% of Portfolio |
| Large (over $1 billion) |
50 — 100% |
| Medium ($400 m — $1 billion) |
20 — 50% |
| Small (under $400 m) |
0 — 20% |
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