The companies we invest in are large capitalization established firms that have had good earnings in the past and whose earnings are expected to continue growing at a rate greater than the market. Our process is not influenced by emotions or the latest stock or industry craze. Our discipline is to screen databases seeking those companies that exhibit the growth characteristics we want to invest in. We overlay a quantitative equity model on the candidate list to identify those with a justifiable price for their expected earnings growth. We perform scenario testing at different growth rate assumptions to determine the validity of the expected growth rates. Fundamental analysis and a stock’s volatility is the final decision step for including a stock in the portfolio.

All client portfolios are constructed from the Model portfolio. The Model portfolio consists of 40-45 large cap companies [$6 billion or greater]. Portfolio names are culled from a Monitor List of some 200 names across most sectors. Since the firm screens and performs scenario testing for companies with real, forward looking earnings growth rates, there will be a greater representation of companies in certain industries and sectors. All things being equal, the firm will choose companies with relatively less volatility. Weightings average 3-4%.

Buy-sell decisions are generated quarterly when we run the screening and valuation process. We screen for new ideas generated by the model that should be considered for inclusion in the portfolio. The primary statistic we look for is a change in the expected five-year earnings growth rate. Again, the expected earnings growth rate is a key factor in our model and changes to that number change the absolute and relative valuation of a stock. In this process, over-valued issues will be considered as sell candidates.