Equity Investing 

Equities

We invest in equities primarily to provide long-term capital appreciation. Investments considered include common stocks, real estate investment trusts (REITs), and covered calls to reduce risk. We believe the only way to successfully invest in the stock market is to consistently apply a disciplined approach.

We employ a bottom-up, fundamental research process when considering equity investments. We start with a large unbiased universe of large, small, and mid-sized companies. The universe is then screened using our in-house valuation models. Once a company passes our screening process, we proceed by rigorously reviewing the company’s fundamentals. This includes an examination of each company’s income statement, balance sheet and statement of cash flow.

Our focus is on valuation metrics. We try to determine the fair value of each business. Once fair value is determined, we evaluate the company’s track record and growth prospects. If we are satisfied with the outlook and the company is selling at a discount to fair value, then it will be added to our buy list. Our equity portfolio is then constructed from the companies on our buy list with the right balance between risk and reward.

Each equity portfolio is comprised of 35-40 different securities. We diversify each account across most major sectors and industries and only buy securities with sufficient liquidity. Tax efficiency is important to us and our portfolio turnover has averaged between 25 and 30 percent. Our goal is to achieve superior returns by investing in sound businesses, selling at reasonable valuations. We seek to identify companies with strong growth potential, improving fundamentals and a catalyst to unlock the value.