Our outlook for the US equity market drives our investment strategy and asset allocation decision.  The outlook is derived from fundamental market analysis combined with a macroeconomic overlay. We seek to identify when the market, sectors, industries and stocks are undervalued. The foundation of our investment strategy is built on the principles of understanding what drives markets and securities.

 
We build our portfolios with absolute performance in mind. We begin by analyzing the attractiveness of the overall US equity market. Our proprietary valuation methodology determines our equity exposure at any given time. Based on our evaluation of the equity market, we then decide either to over or under weight equities.

Once our allocation has been decided, we build a portfolio of undervalued securities using a combination of individual securities and Exchange Traded Funds (ETF’s). We analyze sector, industries and individual securities, using a common formula.  We seek relative valuation and improving fundamentals. We have spent a great deal of effort determining the appropriate valuation methodology to apply to different securities.  Applying the correct valuation metrics is one of our cornerstones to successful investing.

While valuation is important, it is only one component to our process.  We also need to see improvement in the underlying fundamentals. We do not want to buy securities that are simply cheap as they may either stay cheap or even get cheaper. Once this combination of attractive valuation and improving fundamentals is found, we analyze the security for potential inclusion into the portfolio.

If we decide the domestic equity market is not attractive, we use ETF’s to diversify away from the equity market and invest in bonds, international equity markets, commodities, real estate investment trusts or inverse securities that short the market.  It is the recent development of the ETF market that allows our portfolio to be vastly different than those simply investing in the stock market.