Investing With Conviction
Investment philosophy
Our investment philosophy is deeply rooted in understanding the major forces that drive the market over a complete cycle. We analyze monetary and economic conditions, earnings growth, valuations, investor sentiment, and technical market indicators. Constant monitoring of these factors helps us navigate through short-term volatility that often unnerves investors and keeps them from staying objective. At the same time, we must re-examine our assumptions and outlook if these factors change.
Understanding investor behavior and overcoming biases to improve decision-making is also key to our investment philosophy. Emotional processes, mental mistakes, and individual personality traits complicate investment decisions. Thus, investing is more than just analyzing numbers and deciding to buy and sell securities based on fundamental analysis alone. A large part of investing involves individual behavior. Ignoring or failing to grasp this concept can negatively affect portfolio performance.
Investment strategy
We are active portfolio managers who focus on achieving absolute rates of return instead of relative returns to a stock market index. This approach helps us provide consistent risk-adjusted returns for our clients.
The investment goal is to build a diversified portfolio of Canadian and U.S. securities (primarily large-cap companies) with superior return potential over the next three to five years. To capitalize on the long-term market and currency trends, we tactically shift the proportion of U.S. versus Canadian stocks within 30 to 70 percent, depending on our outlook.
We follow a growth at a reasonable price (GARP) investment approach and pursue a disciplined buy-and-sell strategy.
Our universe of securities offers adequate diversification by sector, industry and geography. It allows us to take advantage of market conditions, such as cyclical versus defensive and domestic versus international trends.
We believe a more concentrated and non-benchmark portfolio will achieve appropriate risk-adjusted returns. The portfolio typically comprises 40 to 60 securities, with an annual turnover of approximately 15 to 25 percent.
Buy and sell discipline
We scan our universe of securities daily looking for technically strong companies — improving relative strength, an established uptrend or starting a bottoming process. This process helps us identify new securities to add to our monitor list as stocks often begin a new uptrend before the fundamentals improve. We develop a focus list of securities to perform a growth at a reasonable price (GARP) analysis.
When to buy
- Select thoroughly analyzed securities from our monitor list.
- Identify securities with improving earnings growth rates and a catalyst expected to drive long-term growth.
- Ensure the security has bottomed, a new upturn has started, or the long-term trend is still constructive.
- Initiate the buy program in thirds to smooth out volatility.
When to sell
- If a security exhibits weak relative strength over an extended period or breaks-down technically, we will sell the entire position.
- If a security is grossly overbought, we would take partial profits and add back when oversold.
- Excessive valuations or trading at an upper historical range would prompt us to sell.
We adhere to a strong buy and sell discipline.
© 2018 Ballantyne Capital Ltd.