Investment Strategies - Large Cap Growth
Process
We are long-term investors focusing on high quality growth opportunities. Ours is primarily a bottom-up process in which we inter-relate valuation with earnings momentum. We offer a concentrated portfolio of 30-40 issues actively managed by a team comprised of both portfolio managers and analysts. The team is the catalyst in our decision-making. While we recognize the need to diversify a portfolio's securities and sectors in order to reduce its risk, we believe that, in order to add value, it is also important to have some sector concentration in the portfolio. We are willing to totally exclude a sector from our portfolios if we do not see sufficiently accelerating earnings and/or appropriate valuations.
Our growth equity philosophy utilizes a valuation technique which focus’ on a company's future earnings and dividend growth rates. The process utilizes a present valuation model in which the current price of the stock is related to the risk adjusted present value of the company's estimated future earnings stream. Our analysts closely follow approximately 150 names culled from a universe of approximately 10,000 common equity securities through: market cap screens (>$3 billion); earnings growth rates (minimum 10% historical); proprietary quality evaluation, earnings and valuation models; and fundamental analysis based on qualitative factors and strong financial characteristics. We seek to buy growth stocks selling at a discount to fair value and at a time when superior earnings per share growth is visible for the intermediate term. Our employment of a risk-adjusted discount rate is a unique component of our valuation work. This rate is determined by our proprietary financial scoring process which rewards high quality companies. A holding will be reviewed for sale when it reaches our target price, which is normally 120% of the estimated fair value. A significant earnings disappointment will trigger an immediate review of the holding and a decision will be made to buy additional shares or reduce or eliminate the position.
