The program endorses a top-down value discipline that seeks to identify globally undervalued Markets, Economic Sectors, Industries, and Specific Securities in “Super Cycles” that sell at deep discounts to both their respective and historical intrinsic values. “Super Cycles” are defined as undervalued Economic Sectors, and Industries in the Global Economy that our firm believes are best positioned for “Long-Term Growth”. For example, it is believed that currently “Super Cycles” are driven, first by the industrialization of China, and India, and second by an intense Global demand for digital Mobile Computing. As these nations become more industrialized, and the world will consume respectively more energy, natural resources and mobile computing then these processes will potentially result in increased demand for Energy, Natural Resources, and Mobile Computing.
The first step in the process analyzes the relative attractiveness of global Economic Sectors, and their Sub-Industries. This is done first via in-depth analysis of supply and demand fundamentals, and growth rate projections. Second, global Economic Sectors and Sub-Industries are identified and selected.
Next, individual small to large cap equities are researched. At the end, a rigorous due diligence process is implemented for identifying and selecting individual equities that sell at deep discounts to their respective and historical intrinsic values. Intrinsic values are determined by using discounted cash flow and relative valuation models. The fundamental analysis used to select the individual equities that end up making the Market Value Securities portfolio includes primarily low absolute and relative valuations such as price/earnings, price/book, price/cash, and debt to equity ratios. Other fundamental research followed is based on analysis of barriers to entry, market share, return on equity, growth projections, liquidity, market capitalization, free cash flow generation, debt structure, management tenure, quality of brand, and franchise value.
The program utilizes asset management restrictions in order to achieve favorable risk/reward performance results independent of the market’s strength or weakness. The followings are the disciplines implemented: 1) The portfolio can’t hold less than twenty stocks, 2) Individual equity value can’t exceed 10% of portfolio value, 3) Economic Sector holding can’t exceed 45% of portfolio value, 4) Industry group holding can’t exceed 20% of portfolio value, 5) Account total cash position can’t exceed 30% of portfolio value, and 6) The portfolio can’t hold less than six Economic Sectors. The sell discipline for any Economic Sector, Sub-Industries, and Individual Securities is based on supply/demand and/or individual equity fundamentals.
Our firm believes that prior to a “Super Cycle” peak companies will have massive capital expenditures associated with Growth, Mergers and Acquisitions activities. Eventually, at the height of a “Super Cycle” the sector and its individual equities will dominate the market from an earnings and market capitalization stand point. For example, Technology and Telecommunications grew to 40% of the S&P 500 Index in February of 2000, and during the Japanese Real Estate bubble properties of this country were valued at more than the entire combined U.S Real Estate market. When these signs are apparent, we will rotate out of the Economic Sectors, Sub-Industries, and their related Individual Equities in favor of new undervalued Economic Sectors and Sub-Industries in the world’s economy.
Lastly, periodic ongoing reviews are scheduled with all clients. This process includes the followings: (i) Review of the entire portfolio as well as its underlying Economic Sectors, Sub-Industries and their respective Individual Equities benchmarked each quarter against their respective Equity and World Indexes, (ii) Recalibrate each client’s asset allocation models as his or her life circumstances change, and (iii) Present consolidated reporting that incorporates the Market Value Securities (MVS®) portfolio with the entire holdings of the clients’ other investments disciplines.
MVS® Wrap Program Fee Schedule:
All Equity discretionary money managed programs which includes Market Value Securities (MVS®) will adhere to the following pricing schedule:
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Our firm’s fees are generally not negotiable. Further, our firm’s fees are billed on a pro-rata annualized basis quarterly in advance based on the value of your account on the last day of the previous quarter.