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At ATFinancial Advisors we believe that a long-term approach, anchored by a consistent stock selection and portfolio construction process, is vital to successful equity investing. Our stock selection process is based on the core belief that for a company to be attractive it must demonstrate the ability to create true economic value by earning excess returns on its invested capital and that this economic value ultimately will translate to superior stock performance. Our value expectations model identifies the expectations built into a company’s stock price. Our forecasting model allows us to determine the sustainability of value creation. Together, these tools help us identify companies that are mis-priced in the marketplace. Our process assists us in avoiding the traps that traditional accounting, ratio-based, and multi-factor strategies create – eliminating the urge to be a trend follower and a return chaser.
The 5 components of our stock selection process:
- Seek companies with a history of wealth creation
- Identify companies that have low market expectations relative to growth prospects
- Perform fundamental analysis to determine ability to maintain key drivers of economic profitability
- Calculate intrinsic value of attractive companies based on future economic margin forecasts
- Select companies based on relative valuation and likelihood of sustained value creation
Our equity portfolios are constructed with representation across most of the 10 broad economic sectors and employ an active sector allocation philosophy that allows us to minimize risk and take advantage of market opportunities as they present themselves. By combining our diversified sector allocation philosophy with our focus on company specific value creation, we are able to provide a true core equity portfolio that is well diversified with less sensitivity to major style swings.
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