Investment Style Definitions

Capitalize on the cyclical behavior of the economy and of the market price trends by altering the level of equity exposure in anticipation of these cycles. Managers will switch between different asset classes. 3-way asset allocators switch between stocks, bonds and cash. 2-way asset allocators switch between stocks and cash.

Portfolio characteristics are similar to the S&P 500 index. The objective is to add value over and above the index, typically from sector or issue selection.  Portfolios may exhibit growth and/or value characteristics similar to the broad market but with no consistent preference. This category includes managers with a “stock picking” approach. A high degree of emphasis is placed on comparing companies relative to their historical ranges

Invest in companies that are expected to have above average prospects for long-term growth in the companies earnings and profitability.

  • MOMENTUM BASED GROWTH– a more aggressive approach focusing on earnings acceleration, relative price strength and earnings strength. Analysis is based on a shorter time horizon and portfolio may contain significant weightings in rapidly growing industries.
  • PURE GROWTH– heavy focus on long term projected growth rates over the next 3-5 years. Fundamental research plays a role in identifying companies that have a “catalyst” for growth and predicting future growth in EPS.
  • QUALITY GROWTH– portfolio usually contains larger companies which could be considered “blue chip.” Emphasis on quality is defined in most cases by a company’s consistency in earnings, low debt levels and good cash flow. Portfolios will usually have lower turnover.

Invest in companies believed to be undervalued on an absolute basis or relative to the market and/or historical levels. Undervaluation is usually determined by one or more of the following factors:

  • ASSET VALUE AND PRIVATE MARKET VALUE– the main analytical tool is free cash flow analysis of the company as a whole and its separate divisions.
  • CONTRARIAN– an extreme form of value investing where the manager buys stocks that are considered out of favor by everyone else.
  • HIGH YIELD– above average income stream through higher than average dividends. Managers believe higher total returns will be generated by getting a higher component through cash flows (dividends).

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