INVESTMENT CATEGORIES
Domestic Multi Cap Stocks
Both bottom up and top down analysis are used to allocate funds. The allocation is broad and diverse. There is a value bias to the allocation which leads to stocks selected that pay dividends and have strong balance sheets. However, there are many growth stocks in the strategy. The bar is set high for growth stocks. The growth market needs to be full of opportunity and the company needs to have a differentiated approach to winning business in that growth market.
Each day a number of companies are researched and as a result, we have analyzed, developed and built a watch list of many different companies across many different sectors. The allocation reflects a mix of sectors and market capitalizations. Broad knowledge of many different securities helps to make cross connections related to developments of companies within a sector or between sectors. This has helped to identify many mispriced securities. The screening and criteria analysis document provides more detail on the investment approach to individual security selection.
Each day a number of companies are researched and as a result, we have analyzed, developed and built a watch list of many different companies across many different sectors. The allocation reflects a mix of sectors and market capitalizations. Broad knowledge of many different securities helps to make cross connections related to developments of companies within a sector or between sectors. This has helped to identify many mispriced securities. The screening and criteria analysis document provides more detail on the investment approach to individual security selection.
International Stocks
There is a multifaceted approach to investing in international stocks. Individual stocks, low cost exchange traded funds and mutual
funds are all used to provide a diversified allocation. Individual stocks are bought to provide tactical business sector exposure.
Low cost exchange traded funds are used to provide a broad allocation to certain countries that would be difficult to obtain with
individual securities. Additionally, certain mutual funds are used to provide allocations to certain sectors or countries.
These managers are only included when confidence exists the fund manager will outperform exchange traded funds,
or provide a differentiated investment product.
funds are all used to provide a diversified allocation. Individual stocks are bought to provide tactical business sector exposure.
Low cost exchange traded funds are used to provide a broad allocation to certain countries that would be difficult to obtain with
individual securities. Additionally, certain mutual funds are used to provide allocations to certain sectors or countries.
These managers are only included when confidence exists the fund manager will outperform exchange traded funds,
or provide a differentiated investment product.
High Yield Bonds
High yield bonds are bought to provide some diversification to the strategy and to boost the income stream but the primary rationale for purchasing high yield bonds is to generate a strong total return that includes capital appreciation. In most cases, high yield bonds bought for the portfolio will not have short term callable features unless the bonds are trading at a discount. The maturity of the bonds will likely be kept short but can extend out to improve capital appreciation potential.
Generally, bonds are bought for companies that are perceived to have improving business conditions or stated deleveraging goals.
At times purchases will be based on event driven circumstances such as a strong possibility of a change of control.
Generally, bonds are bought for companies that are perceived to have improving business conditions or stated deleveraging goals.
At times purchases will be based on event driven circumstances such as a strong possibility of a change of control.
Covered Calls
The writing of covered calls in the strategy is done for two main purposes. The first is to hedge stocks that have appreciated in value. Once a stock has risen to a level that makes its perceived value less attractive, a decision needs to be made whether to sell, hold or hedge. At times, the appropriate decision is to write a call against the stock and collect a few percentage points in premium, with the understanding that if the stock rises above the strike it will be called away.
The second focus of call writing is to identify attractive securities whose options are pricing in a large implied volatility that is more representative of the historical volatility of the stock than its future volatility. Often times these are securities that have experienced a sharp selloff and are trading at more reasonable valuation levels. Importantly, the securities have reached a price point where there is substantial downside protection such as cash on the balance sheet. Even if a rebound in the stock does not occur in the near future, as long as the stock does not continue to move lower, the call premiums will generate a strong return.
The second focus of call writing is to identify attractive securities whose options are pricing in a large implied volatility that is more representative of the historical volatility of the stock than its future volatility. Often times these are securities that have experienced a sharp selloff and are trading at more reasonable valuation levels. Importantly, the securities have reached a price point where there is substantial downside protection such as cash on the balance sheet. Even if a rebound in the stock does not occur in the near future, as long as the stock does not continue to move lower, the call premiums will generate a strong return.
Want to know more about the Opportunistic Strategy?
*The investment(s) discussed may not be suitable for all investors. Investors should make investment decisions based on their own specific investment objectives and financial circumstances.
**Additional information is available upon request.
***Any investment contains risk, including the risk of total loss, fluctuating prices and uncertain returns.
**Additional information is available upon request.
***Any investment contains risk, including the risk of total loss, fluctuating prices and uncertain returns.
