Equity Strategies

Equity Strategy
Research Methodology & Process

Our overall research methodology is built on a time-tested, three stage process. This process is top-down driven and has a strong emphasis on identifying quality, based on peer-to-peer analysis in each industry and sector. Importantly, we leverage this research process across all of our equity portfolio strategies.

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. Actual sector weightings may vary across our different equity strategies reflecting the unique characteristics of each.

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).

Portfolio Review & Sell Discipline

Our investment team is continually reexamining the holdings in all of our equity strategies 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 continually retest our overall top-down strategy 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 each strategy.

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.

Core Equity Strategy

Our Core Equity Strategy is typically comprised of large-cap quality growth stocks but may also include small-cap, mid-cap, and international stocks. Our focus on high quality, industry leading companies results in a well-diversified portfolio of global corporations.

Core Equity
Top 10 Holdings

Financial Sector ETF

Apple Inc.

Google

Marriott Intl.

Becton Dickinson

BlackRock Inc.

Microsoft Corp.

Facebook Inc.

Celgene Corp.

Dycom Inds.

 

In today’s global economy, strong companies must compete on a worldwide platform. As a result, we analyze investment trends and search for opportunities not only within the U.S., but also in international and emerging markets. Many of the holdings in our core portfolio generate more than 50% of sales outside of the United States. The balance of large cap, mid cap, small cap, international, and emerging markets provides solid diversification and growth opportunities for our clients. Valuation parameters include: Price/Earnings (PE), Price/Cash Flow (PCF), Price to Growth (PEG), and Price/Book Value (PBV). Actual portfolios will hold between 35-40 stocks.

Enhanced Yield Strategy

The Enhanced Yield Strategy seeks to achieve an average dividend yield of approximately 1.5x the current yield of the S&P 500. The portfolio is comprised of common and preferred stocks, ADRs, MLPs, and REITs that trade on US exchanges. The portfolio consists of high quality companies that have sustained track records of positive dividend growth. We have a strong focus on company cash flow generation as an important driver of future dividend growth. We also leverage our time-tested, three-stage research process when evaluating securities to add to this strategy which typically includes 25 – 35 holdings.

Enhanced Yield
Top 10 Holdings

Intel Corp.

JPMorgan Chase

Cisco Systems

Microsoft Corp.

Johnson & Johnson

PepsiCo Inc.

AbbVie Inc.

Microchip Technology Inc.

Chevron Corp.

Lockheed Martin Corp.

 

Equity Income

Equity Income Select

Equity Income &
Equity Income Select Strategies

Generating steady income from traditional fixed income investments is a challenge due to the current low interest rate environment. The Equity Income and Equity Income Select strategies attempt to overcome this by building diversified portfolios of income generating securities across asset classes and sectors. These strategies do contain more risk than traditional high quality bonds; however we believe the long-term risk is lower than reaching for yield within fixed income by focusing solely on long-dated or lower credit quality bonds. The primary objectives in selecting securities are the sustainability of the current dividend and the ability of the company to raise the dividend in the future. The Equity Income strategy may be comprised of high dividend paying stocks, preferred stocks, and fixed income investments. The Equity Income Select strategy, which is available for taxable accounts, may hold the same securities with the addition of Master Limited Partnerships.

Top 10 Holdings

Equity Income

Eaton Vance Floating Rate Fund

iShares Tr U.S. Preferred

Wells Fargo Preferred

US Bancorp Preferred

BGC Partners Inc.

HSBC Holdings PLC Preferred

Bank of America Preferred

Royal Dutch Shell

Bank of Nova Scotia

AbbVie Inc.

Equity Income Select

Eaton Vance Floating Rate Fund

iShares Tr U.S. Preferred

Wells Fargo BK N Pfd

HSBC Holdings PLC

Blackstone Group

US Bancorp Preferred

Royal Dutch Shell

Bank of America Preferred

Bank of Nova Scotia

AbbVie Inc.

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