Philosophy and Process

     My belief is that financial security and steady long-term growth can be attained by blending my clients specific objectives with the long-term trends inherent in the markets. This strategy allows me to find the right asset mix and make rational decisions, even in turbulent markets. I have found that short-term trends may veer in confusing directions, however, with patience, exceptional long term growth can be achieved in the market.


My equity philosophy is three-fold:

1. Protect Capital

2. Provide a Growing Level of Income

3. Achieve consistent Long Term Growth

My means of reaching these goals is through focusing on 3 types of stocks -- Quality Yield, Cyclical Growth, and Superior Earnings.   

Quality Yield Stocks are companies that have a premium dividend and a strong balance sheet. These features can both support the dividend in weak economic conditions and grow the dividend over a long period of time.

Cyclical Growth Stocks tend to move in line with the economic trends yet have solid growth over the long run.

Superior Earnings Stocks have above average growth and can be the real athletes of the portfolio. Of course, with greater potential reward sometimes comes greater potential risk.

      The mix of these three types of stocks depends on the long term objectives of each client. Ultimately, the focus is to provide consistent growth through various market conditions. Focusing on these 3 types of stocks creates diversification, which helps provide downside protection as well as an opportunity to achieve growth in all types of market conditions.

      Another component to my investment philosophy is analyzing stocks over a longer time horizon.  I believe that maintaining positions through short-term stock gyrations and short-term corporate challenges help clients achieve the full benefit of the long term growth of stocks. I analyze stocks through the lens of fundamentals, valuation, and technicals to find these long-term trends.  

      Fundamental analysis involves understanding the key products, long term earnings growth prospects, strength of balance sheet, and ability to maintain and grow dividends.

       When I analyze the valuation of a stock, I am determining how cheap or expensive any given stock is compared to the market, to competitors, to it’s own history, and to it’s expected growth.

      Technical analysis is simply reading the stock charts in order to figure out the long-term trends.  Each chart is carried by a great, underlying potpourri of all known bits of information about the company, the markets, current events, and even the emotion that lies beneath stock movements.  Often one can glean from these charts future trends and most importantly, whether the long term trends will continue.   

       I use the same three types of analysis, fundamentals, valuation, and technicals, in my sell discipline. If one of these sections turns negative, the stock gets re-analyzed to make sure I am still comfortable with the holding. However, a stock becomes an automatic sell if two of these sections turn negative.  Being able to use a defined sell discipline takes some of the more negative emotions away from the analysis and puts reason back in charge.


In regard to fixed income securities, I operate using two principles:

1. Protect capital

2. Provide a stable level of income

      Staying true to these principles, the focus in all of my fixed income portfolios is to hold the highest quality securities. Too many investors stretch for extra yield and, in turn, sacrifice the safety of their principal as well as the predictability of their income.

      The fixed income portion of the portfolio should be the safe part, so why sacrifice here? I strongly believe in avoiding additional risk to gain slight additional income in bonds and dividends. 

      However, in today's low interest rate environment, investors should factor in that safe bond securities will not provide the returns that they have provided historically.  Unfortunately, this makes many traditional asset allocation models out-of-date. To make up for lower yields, many investors are either using low quality bonds while not considering the potential risk, and/or focusing on short or intermediate term investments that simply do not provide adequate income.  

      I believe a better alternative is to replace a portion of what used to be allocated to fixed income with high-quality, dividend yield stocks. These companies have strong balance sheets and a history of raising dividends even in difficult economic environments.  By adding allocation to these types of companies, investors will in many cases improve the yield over fixed income investments.  The drawback is that in declining markets there is still some volatility, but over time, income will rise due to rising dividends.  In addition, though there is potential downside in declining markets, historically, these stocks still outperform low quality bonds even in severe declines because of their strong balance sheets, while much of the principal risk is significantly reduced over a long period.

     Quality yield stocks can really benefit over long periods of time -- take, for example, Johnson & Johnson. In 2005 Johnson & Johnson had an approximate dividend yield of 2%.  In 2015 its yield based current price is over 3%.  But because the dividend has increased over 10 years, the yield on the 2005 price for Johnson & Johnson is closer to 5% -- that is in addition to the 40 point or approximately 60% increase!  No bond can provide this type of return.