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Through extensive research and analysis, we buy excellent businesses when we see them at sound valuations. We seek above-average returns by having the discipline to avoid overpaying for even the best companies.
Total Return Strategy
Our Process
Our initial screens take the approximately 12,000 company database down to around 800 for the Total Return product. Our research tool screens for the types of growth companies we are looking for that reduces this list down to under 200. We are typically actively reviewing and researching between 35 to 75 companies for inclusion/exclusion on behalf of the large-cap portfolios.
Portfolio Characteristics
We tend to concentrate in 20 to 35 holdings. We define the large-cap arena as companies above $5 billion. Our weighted-median market cap tends to be over $20 billion. Our weighted-average market cap tends to be over $40 billion. We invest many hours of research into each holding, such that we tend to be long-term holders of positions. Our turnover averages around 30%.
We use a consensus team approach to managing the portfolios. Chuck Carnevale, our Chief Investment Officer, has the final say as to the buy, sell, and hold decisions of the portfolios.
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SMid-Cap Growth
Our Process
We use a similar process for managing all of our portfolios, including our SMid-cap portfolios. The basic difference for finding excellent growing businesses for this product is the SMid-cap size. We consider a history of double-digit growth in earnings over the past 5 years to be one of the critical factors that separates great businesses from mediocre or average businesses. We have found that great businesses generate above-average earnings growth over the long run. Most of our SMid-cap companies have double-digit earnings growth for more than 5 years.
Our initial screens take the 12,000 company database down to around 8,500 for the SMid-cap product. The SMid-cap universe is where we find the most number of companies with opportunity for above-average growth. Next, we screen for the types of growing companies we are looking for to reduce this list down to approximately 200. We are typically actively reviewing and researching between 35 to 75 companies for inclusion/exclusion on behalf of the SMid-cap portfolios.
Portfolio Characteristics
We tend to concentrate in 20 to 35 holdings. We define the SMid-cap arena as companies between $1 and $10 billion. Our weighted-average market cap tends to be over $5 billion. Our median market cap tends to be over $3 billion. We invest many hours of research into each holding, such that we tend to be long-term holders of positions. Our turnover averages around 65%.
In terms of forecast growth, we continue to seek companies with a long-term earnings growth of 15% to 20% or better compounded.
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Income Strategy
Our Process
We use a similar process for managing all of our portfolios, including our Income portfolio. The basic difference is our focus on dividend paying businesses only. In this category, there generally is a trade-off between growth and yield. The higher the yield, the lower the growth and vice-versa. Our objective is to invest in high quality companies that provide an increasing dividend income stream and moderate growth.
Our initial screens take the 12,000 company database down to around 2,500 for the Growth & Income product. The growth and income universe is where we find companies with average to moderate growth and a history of increasing their dividend consistent with that growth. Next, we screen for the types of growth and income companies that meet our criteria to reduce this list down to approximately 100. We are typically actively reviewing and researching between 35 to 75 companies for inclusion/exclusion on behalf of the Income portfolios.
Portfolio Characteristics
We tend to concentrate in 20 to 35 holdings. We blend higher growing companies with lower yields, but faster growing dividends with slower growing companies with higher yields but slower growing dividends. Our weighted average market cap tends to be over $3 billion. Our median market cap tends to be over $15 billion; our weighted-market cap tends to be over $30 billion. We invest many hours of research into each holding, such that we tend to be long-term holders of positions. Our turnover averages around 5% or less.
In terms of forecast growth, we are willing to accept lower growth as long as a company has a history of increasing their dividend consistent with whatever earnings growth they achieve.
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