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Investment
Philosophy
Our investment philosophy
is a bottom-up approach with each manager focusing on mid to large cap
companies in a specific sector. Managers pick stocks based on a long
term perspective, with particular attention given to the business model,
performance, and free cash flow valuation of a company. Although the
fund looks at both value and growth stocks, it is value oriented and
seeks growth only at a reasonable price. In keeping with this, managers
look for stocks with a minimum 15% perceived discount to their intrinsic
value and which trade at a discount to their historical valuation
metrics.
The fund’s overall goal is
to select a diversified group of stocks that will outperform the S&P 500
over a 5 year horizon. The fund will be invested across the same ten
sectors as the S&P 500, but it will be more heavily weighted in sectors
that managers consider to have more potential. In assessing the quality
of investments, managers pay particular attention to the following value
drivers:
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Operating Margins -
Change in gross and operating margins compared to competitors.
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Revenue and earnings
ramp up - Growth in revenues and earnings over time.
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Capital Expenditures -
Fixed Assets and capital required to achieve production volumes.
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R&D Intensity -
Investment needed in R&D.
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Free Cash Flow Growth
- Intrinsic value of company based on expected future free cash
flows.
In assessing the value of
companies, managers pay particular attention to the following metrics:
The managers combine the above value drivers and the metrics to find
optimal stock picks which fit into our investment strategy. Our group
believes that with the aid of these ratios, we will construct a diverse,
value-rich portfolio which will be successful through the duration of
our 5 year time horizon.
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University of Connecticut |