International Equity Investment Process

The investment process is constant. It begins with the portfolio team. All portfolios are created through a strong consensus process. Each product has a team leader who is responsible for leading the specific product; however, all actions are taken through a simple majority vote. Curt Scott is the team leader for the International Equity strategy.

Every week, the respective securities in the database are quantitatively reviewed and screened to create a subset of candidates. These candidates are sorted by multiple headings, including price to intrinsic value, market capitalization, sector, and quality, among others. The team then evaluates the list of securities that meet the criteria for purchase or sale. A weekly research meeting is held for each product at Todd. The team leader, in conjunction with the Director of Research, is responsible for setting the agenda and preparing for the weekly meeting. Our basic framework, including format and process for weekly meetings, is standardized for all fundamental investment products.

We begin with a macroeconomic overview of the world economy to evaluate each of the countries represented in the EAFE index. We then evaluate the respective region weightings in the EAFE and modify these weightings by up to plus or minus 10% on an absolute basis. We may also add up to 20% in non-EAFE securities. Assessments are then made regarding the 10 major financial sectors both from a macroeconomic perspective and through our Price to Intrinsic Value process. Utilizing our proprietary Price to Intrinsic Value methodology, we rank each of the sectors. Stocks are then run through our proprietary Price to Intrinsic Valuation methodology and screened for market capitalization and favorable price to intrinsic valuation. We take the residual list of approximately 300 and begin to fundamentally evaluate them for inclusion in the portfolio. The final step is to match acceptable candidates to the macroeconomic overview completed at the beginning of the process. Should no suitable candidates be found due to poor valuation, we may seek to become a market participant in that particular sector or country by utilizing an ETF where available.

We seek to build a portfolio of approximately 75-110 names. The portfolio allows no purchase greater than 2% at inception and 3% at appreciation. The portfolio limits purchase of securities to those with market capitalization of $1 billion or greater and are traded on the U.S. exchanges. We also utilize technical analysis for momentum, moving averages, and sell side pressure among other factors to determine the proper entry point for the position. Upon inclusion in the portfolio, we employ a strict sell discipline. Should a position decline by 10%, it is automatically put on watch and reevaluated. A determination is made to buy, hold, or sell. Should a position decline by 20%, we employ an automatic sell discipline. The screens are run weekly and the portfolio run daily for a review of holdings.

International Security Selection

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How We Buy Stocks

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Process Summary

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International Equity Full Description
International Equity Investment Process
International Equity Characteristics
International Equity Performance
International Equity Product Summary
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