The capital growth strategy is suitable for those who are willing to accept some short-term volatility in their principal in order to achieve maximum long-term appreciation of their capital. In order to achieve this objective, we take a principles based approach to equity investing. The principles that guide our investment philosophy are: 1) Quality, 2) Value, 3) Diversification, and 4) Patience.

1) Quality. We emphasize investing in companies with credible managements who have demonstrated the ability to consistently execute their business plan. We look for companies that have the financial strength to sustain and grow a regular cash dividend to shareholders. We also look for companies whose executives and directors are increasing their ownership in the firm.

2) Value. We avoid chasing “growth” with a disregard for how much we are paying for a stock. We insist on paying an attractive multiple of a company’s earnings and dividends at all times.

3) Diversification. In order to minimize the risk to a portfolio, we spread our investment positions over a number of individual companies and industries, avoiding the vulnerability inherent in over-concentration. Ideally, we invest no more than ten percent in any given company or industry and twenty percent in any given economic sector.

4) Patience. We believe that the real value in equity investing is realized over the long-term, not in any given quarter. The majority of managers, on the other hand, invest based on short-term performance measures. The net result is that the average equity mutual fund turns over its entire portfolio in a given calendar year. This has two negative consequences: 1) Investments are not given the time needed to fully realize their value, and 2) transaction and tax costs are needlessly generated. We avoid such shortcomings by giving our investments the time needed to develop, given that the long-term strength of the firm and our investment thesis remain intact. Also, we are sensitive to the timing of entering investment positions based upon where we are in the economic/market cycle. Although a stock may be a solid long-term value, we will patiently wait for the optimal entry point before we invest.

By adhering to these principles at all times, we are able to maximize the long-term growth in our customers’ capital. While short-term volatility is inherent in any equity investment, our quality/value-centered approach greatly reduces the long-term risk to your investment portfolio by avoiding the pitfalls that have historically led investors to lose significant amounts of money in the stock market.