Equity Investment Process

1. Investment Universe

Build universe of 150-200 stocks for analysis, based on criteria such as earnings growth, profit potential, valuation, and performance relative to other companies in the same industry and sector. Diverse sources of new investment ideas are encouraged.

2. Quantitative Ranking

We develop five-year normalized growth and profitability estimates for each stock in the universe. Quantitative valuation models are then utilized to rank industries and companies according to our assessment of potential future growth. To be eligible for purchase, a stock must be reasonably priced relative to its projected future growth rate.

These valuation models impose a healthy discipline: they help us avoid the trap of not buying a stock simply because it has already performed well. It also provides an objective measure of value on which to base long-term convictions, when short-term difficulties cause an unwarranted decline.

3. Qualitative Assessment

Analysts conduct original research to assess management’s skill in guiding the company through a changing environment and their ability to exceed current expectations. The quantitative ranking reflects what has happened in the past. Our qualitative assessment captures what is likely to happen in the future.

4. Portfolio Construction

Combine the quantitative and qualitative steps to create an optimal portfolio. Sector weightings incorporate both a top-down economic outlook, as well as a bottom-up valuation approach to individual holdings. The portfolio emphasizes sectors and companies we believe have the best prospects for future growth, while seeking to avoid over-concentration.

5. Ongoing Review

Asset allocation and sector weightings are monitored in light of new economic and market events. Stocks are evaluated for potential addition or sale based on price movements, target weights, fundamentals, and earnings revisions. Current holdings are compared to potential new holdings for opportunities to upgrade the performance potential of the portfolio.