Our process in choosing individual stocks

July 20, 2022

In the stock market, industries are called sectors. We attempt to goose investment results by over-weighting or under-weighting sectors based on our outlook for an industry. If a particular sector is 9% of the stock market and we see good demand, we may invest 12% of a portfolio in that sector. Vice versa, we will own nothing in a sector with weak prospects.

In general, we intend to own 25 stocks in a portfolio. Viewing the stock portion at 100%, if we invest in each stock equally, then each stock would be 4% in weight. We increase or decrease this amount based on each client’s risk/return profile and our outlook for that stock. Low-risk clients get smaller positions if it is a higher-risk investment.

A company may look like a great fundamental investment opportunity but the price may not be attractive. In those cases, we put the company on our watch list waiting for some bad news to knock it down in price. If it does, we evaluate the news before purchasing the stock. We are long-term focused and are stalwarts in the face of temporary bad news.

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