Philosophy & Process

The High Income Equity Portfolio seeks to balance three goals: safety, income and capital appreciation. We do not seek to accomplish all three goals with each portfolio investment. Rather, our goal is to have an overall portfolio that accomplishes our three goals by incorporating diverse investments that each strongly exhibit at least one of the three criteria. We think of the portfolio as a “barbell,” with safety and income stocks on one side and capital appreciation stocks on the other. Because the safety/income securities exhibit an exceptionally high level of those characteristics, we are then able to add more volatile investments with the potential for greater capital appreciation while still limiting the risk of the overall portfolio. We believe this differs from the great majority of income equity portfolios, which invest solely in blue chip, high dividend (but often slow growth) companies. By using the “barbell” approach, we believe we can produce a portfolio with lower volatility, a higher yield and a greater potential for capital appreciation over time.

The portfolio typically consists of a total of 20-30 securities, with a typical holding period of two to three years. Tax efficiency is a second goal of the high income equity portfolio. Cash is not a favored alternative, but is sometimes a residual of the investment process (i.e., cash will accrue from time to time if attractive investments cannot be identified in the short term).

 

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