Our investment management services are predicated on our belief
that the most reliable methods of fundamental research are based
on facts rather than forecasts. We pay close attention to
a company’s revenues, trailing earnings from operations, dividends,
return on equity, and balance sheet. To us, forecasted earnings
by Wall Street are only opinions; dividends and reported operating
earnings are facts.
STOCK SELECTION
The
key to producing strong returns begins with stock selection.
At Groesbeck, we use a variety of sources to conduct stock research
and generate investment ideas. Electronic research is conducted
through use of the Internet, computer screening of financial databases,
and a variety of websites devoted to the stock market and equity
research. In addition, we use the equity research web capabilities
of some Wall Street brokerage houses. We do our own homework on
securities under consideration and those already owned.
In
looking for investment candidates, we focus on the equity securities
of companies that have the following characteristics:
- Strong sales and earnings growth
- Consistent annual growth trends
- Sound balance sheets
- High returns on equity
- Good long-term financial track records
- Market leadership with growing market share
- High trading liquidity
- Reasonable valuations on an absolute and relative basis
PORTFOLIO CONSTRUCTION &
MAINTENANCE
Once
we have found stocks that meet our investment criteria, we then
build fully invested portfolios consisting of 30 to 40 stocks, diversified
across a broad spectrum of industries. Positions are routinely rebalanced
in order to prevent any one position from becoming top heavy. Moreover,
we also trim positions as they become fully valued and seek to replace
them with more moderately valued stocks. By continually monitoring
portfolios and constantly seeking new stock ideas, we create portfolios
that remain vibrant. At Groesbeck, we do not engage in any
“fad” investing, short-term trading, market timing, derivatives,
or short selling.
SELL DISCIPLINE
Just
as stock selection and sound portfolio maintenance are necessary
to achieve strong returns, a sell discipline is equally
important. In monitoring our clients’ portfolios, we sell stocks
that exhibit the following characteristics:
- Slowing sales growth and earnings growth
- Poor earnings prospects
- Declining margins
- Diminishing fundamentals
- Slowing dividend growth or reduction of dividends
- Overvaluation
In summary, our disciplined approach assures that we remain fully
invested and that we seek to own quality companies whose earnings
are growing and which should provide higher-than-market stock price
appreciation over the long haul. Our investment process also
results in portfolios with relatively low turnover and minimal tax
implications. We remain committed to our investment process and to providing
excellent client service.
|
(pdf 458k)
