Personalized Portfolio Construction
Achieving our client’s financial goals is dependent on our understanding their personal/family situation, financial resources, tax status, and risk tolerance. We translate that understanding into a unique and comprehensive portfolio plan. We work with our client’s other trusted advisors to coordinate their investment, financial, tax, and estate planning strategies.
Our role in the investment plan may involve equity, fixed income, or balanced management. Whether we are called on for managing a specific asset class or the entire portfolio, we will review the plan regularly and make changes as necessary should circumstances change or the market environment shift.
Disciplined Investment Process
We apply a three-pronged investment process whether we are investing in fixed income or equity. While our focus is on finding good investments regardless of industry or sector, we do look at the overall economic and credit environments to assess our portfolio construction. This analysis also guides our exploration of new ideas and helps us identify future prospective investments. We use a variety of research sources and supplement that with our own investigations and analysis.
Purchasing securities is only half of the process. Selling is critical. We are careful not to over-react but we do monitor trading and valuation trends that may be precursors of negative news. Just as importantly, we monitor the portfolio and sell holdings as needed to maintain portfolio diversification. Sell decisions are triggered by:
- Negative changes in fundamentals which reduces a company’s or issuer’s long-term earnings ability such as a deterioration in the issuer’s financial position
- Extraordinary events, such as a merger, which we believe will negatively alter a company’s performance
- Significant changes in the valuation of the asset
Our Equity Selection Process
Our equity portfolios are well diversified with a tilt toward growth stocks. We have found that portfolios based on companies with consistent earnings best fit the long-term goals of our clients. We are looking for investments not trades. We select stocks with reasonable market valuations based on their anticipated earnings prospects and patterns of strong earnings and revenue growth.
We particularly focus on:
- Historical sales and earnings growth
- Stability of earnings
- Return on equity
- Debt to total market capitalization
In evaluating specific stocks, we rely on our own analysis based on the collective experience and varying perspectives of our portfolio managers, as well as third party research and research provided by major Wall Street firms.
We look at various technical and valuation measures. One such measure is the PEG ratio. This measure compares the price/earnings ratio to the expected growth rate of the company. If the PEG ratio is too high a stock may be overvalued relative to its future growth.
We often supplement our individual stock holdings with exchange traded funds (ETFs) or mutual funds to broaden exposure or more efficiently access certain investment themes.
Our Fixed Income Selection Process
Criteria is established for each client based on the portfolio goals, risk profile and tax bracket. The structure of the portfolio is then adjusted based on our evaluation of current and expected interest rates taking into account economic conditions such as monetary policy, fiscal policy, economic strength, and inflation.
Depending on whether we are structuring a portfolio of taxable securities or municipal bonds, we select securities that meet the quality and maturity criteria established for the individual client portfolio. We also use exchange-traded funds or mutual funds to gain exposure to specific market segments when we deem it beneficial to the client.
Just as with our equity portfolios, the sell discipline is critical to long-term success. We monitor the credit quality of our holdings. If there is significant deterioration of the credit quality, we will assess the long-term implications and respond accordingly. We will also, where appropriate, make adjustments to the portfolio duration and quality structure based on changes in market conditions or client circumstances.