Our objective in managing the equity portion of a portfolio is to achieve superior returns by investing in high quality growth companies that benefit from attractive secular trends we have identified and that exhibit certain characteristics we find compelling. Identifying these companies is done with a global perspective as superior growth opportunities are often outside the United States and as the secular trends we identity often have global implications. As we invest for superior performance, we also control risk through relevant and effective diversification.
Having identified key trends that are expected to provide a tailwind to growth and profitability for various sectors and industries, we then identify the most attractive growth companies within those areas. Characteristics used in identifying such companies are:
Above average and improving growth and profitability
Strong financial position with resources to fund growth from internal sources of cash flow
Transparent and sensible accounting practices
After selecting the companies possessing these characteristics, we then determine optimum entry points on the stocks. During this process we analyze various valuation and technical data in our decision making. Typically we own 40-50 equity issues in a portfolio as this quantity allows ample diversification for risk and liquidity considerations. Individual position sizes of 2-4% of portfolio value are determined on issues related to relative attractiveness and risk.
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