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| top 10 individual stock holdings | |
|---|---|
| Apple | Schlumberger |
| Cisco Systems |
Tetra Tech |
| IBM | General Electric |
| JP Morgan |
EMC |
| Exxon Mobil | Hewlett Packard |
| Portfolio holdings by sector | |
|---|---|
|
Materials: |
Nucor, Calgon Carbon |
|
Industrials: |
United Technologies, Tetra Tech, Lindsay Corp., Flowserve, GE, Badger Meter |
|
Technology: |
Cisco Systems, EMC Corporation, Apple, Intel, IBM, Hewlett Packard, Microsoft |
|
Cons. Disc: |
Staples, Best Buy |
|
Cons. Staples: |
Procter and Gamble, Clorox |
|
Energy: |
Apache, Exxon Mobil, Schlumberger |
|
Finance: |
Wells Fargo, JPMorgan Chase |
|
Health Care: |
Medtronic, Novartis, Baxter, Becton Dickinson, CR Bard |
|
Small Cap: |
iShares S&P Small Cap Index |
|
Mid Cap: |
iShares S&P Mid Cap Index |
|
International: |
Vanguard Emerging Markets ETF |
We utilize a time-tested, three-stage process for constructing equity portfolios. Our analysis is top-down driven with a strong emphasis on identifying quality based on peer-to-peer analysis in each industry and sector. Portfolios typically include 30 – 35 stocks.
The latest economic indicators, especially related to employment, point toward slowing momentum in the economic recovery. Concerns over the potential for a “double dip” recession have increased sending stocks lower over the past couple months. This heightened uncertainty makes the upcoming corporate earnings season critically important as a catalyst for the market in the second half of the year. Moreover, it will be interesting to see what corporations do with their cash flow which has remained strong despite the apparent slowdown in the economy. Higher dividends, share repurchases, and increased merger & acquisition activity, would all be positive uses of corporate cash from a shareholder perspective. Meanwhile, the political winds are turning more toward deficit reduction as a top priority. The critical question becomes balancing fiscal reform with the need to keep the economy going. In the long run, corporations and the rest of the private sector may in fact be more inclined to invest and hire new employees once our government focuses on deficit reduction, even if it means short term economic pain. As always, we remain committed to owning the highest quality individual stocks and bonds.
Net Returns for the Willingdon Wealth Management Flagship, Large Cap Quality Growth Portfolio
as of June 30, 2010
Annualized Performance
Cumulative Performance
| Annualized | Year to Date | 1 Year | 3 Year | 5 Year | Since Inception* |
| WWM Core Equity | -8.6% | 7.8% | -3.2% | 2.2% | 2.7% |
| S&P 500 | -6.7% | 14.4% | -9.8% | -0.8% | 0.4% |
| Russell 1000 Growth | -7.6% | 13.6% | -6.9% | 0.4% | 0.6% |
| Cumulative | Year to Date | 1 Year | 3 Year | 5 Year | Since Inception* |
| WWM Core Equity | -8.6% | 7.8% | -9.4% | 11.7% | 18.4% |
| S&P 500 | -6.7% | 14.4% | -26.6% | -3.9% | 2.3% |
| Russell 1000 Growth | -7.6% | 13.6% | -19.3% | 1.9% | 3.7% |
Growth of $1M - last 5 years
* Performance Inception Date = 2/29/04
* WWM returns represent total equity composite returns. Returns are net of all management fees and transaction costs. All fully discretionary equity portfolios invested in the Willingdon Wealth Management core equity portfolio are included in the composite. The S&P 500 represents 500 of the largest US domiciled companies. The Russell 1000 Growth index is comprised of the companies in the Russell 1000 Index with higher growth characteristics. Past performance is not a guarantee of future results.
We utilize a time-tested, three-stage process for constructing equity portfolios. Our analysis is top-down driven with a strong emphasis on identifying quality based on peer-to-peer analysis in each industry and sector. Portfolios typically include 30 – 35 stocks.
stage 1: qualitative analysis
We define quality as the sustainable competitive advantage a company enjoys over its competition. We have a checklist to assess competitive advantage including the following variables: product, price, service, management, cost position, market position, financial strength, strategic planning, technology, and execution. This is a dynamic process whereby different variables are given greater weight in some industries while given lesser weight in others. The key is to determine the critical driving forces in each industry in order to accurately assess the relative competitive advantages that each company may possess.
stage 2: top-down analysis
We identify long-term market drivers, or secular trends, which determine the sectors of the market likely to outperform and those likely to underperform the overall market. Based on this analysis we will position portfolios to hold a larger or smaller position in relation to the sector weights in the S&P 500.
stage 3: quantitative analysis
We utilize industry specific valuation methodologies to determine the upside and downside potential for stocks that pass our qualitative screens.Typically this involves approximately 200 companies. Valuation parameters include: Price/Earnings (PE), Price/Cash Flow (PCF), Price to Growth (PEG), and Price/Book Value (PBV).
We are continually retesting each holding in the portfolio in the context of our three-step investment process. We continually challenge our qualitative assessment as the competitive landscape changes in response to the economy or other market forces. Likewise, we review our overall top-down strategy on an ongoing basis through the various stages of the economic cycle. Lastly, through our quantitative valuation models we monitor the relative upside and downside of each individual stock in the portfolio.
Our sell discipline flows from our three-step process as follows: First, if the company loses its quality – no longer has a sustainable competitive advantage vs. its competition it would be a candidate for sale. Second, a change in our top-down strategy may lead to increasing exposure in one sector and reducing exposure in another sector. Third, if a stock becomes over-valued based on our valuation analysis it may be a candidate for sale.
Our focus on high quality, industry leading companies results in a well-diversified portfolio of global corporations. In today’s global economy, strong companies must compete on a worldwide platform. We analyze each investment opportunity for its position and growth prospects in all markets, not just our domestic market. Many of the holdings in our core portfolio generate more than 50% of sales outside of the United States.
In addition to the inherent geographic diversification in a portfolio of industry leading companies, we add a second layer of diversification to the portfolio using exchange traded funds (ETFs). ETFs are low cost investment vehicles that track a specified index. ETFs generally make up 5% - 20% of the equity allocation.
We currently use the following ETFs in our core equity portfolio:
- iShares MSCI EAFE Index Fund (EFA). The iShares Morgan Stanley Capital International Europe, Australia, and Far East Index Fund tracks the performance of the MSCI EAFE Index, an equity benchmark for developed international markets. Top holdings by country include: United Kingdom, Japan, France, Germany, Switzerland, Australia, Spain, Italy, Netherlands, and Sweden.
- Vanguard Emerging Markets Index VIPER(VWO). The Vanguard Emerging Markets VIPER seeks to track the performance of a benchmark index that measures the investment return of stocks issued by companies located in emerging market countries. Top holdings by country include: Brazil, South Korea, China, Taiwan, Russia, India, South Africa, Mexico, Malaysia, and Israel.
- iShares S&P Small Cap 600 Index Fund(IJR). The iShares S&P SmallCap 600 Index Fund seeks investment results that correspond to the performance of publicly traded U.S. small-cap stock securities, as represented by the S&P SmallCap 600 Index.
- iShares S&P Mid Cap 400 Index Fund (IJH). The iShares S&P MidCap 400 Index Fund seeks investment results that correspond to the performance of publicly traded U.S. mid-cap stock securities, as represented by the S&P MidCap 400 Index.
