Intrinsic Value Opportunity Investment Process

The investment process is quantitatively oriented and applied with discipline. The lead portfolio manager on this product is Jack White, CFA. When we started our development for this product, we examined our core beliefs to apply those in a systematic manner and create a product that capitalized on those beliefs. Our core beliefs are as follows:

• Valuation matters - Price to Intrinsic Value to be specific.
• Market acceptance matters - as measured by relative strength.
• Financially strong companies outperform over time.

Starting from that base, we tested for various quantitative measures to represent each of these core beliefs, and we settled on three. Those three are Price to Intrinsic Value, relative strength, and share repurchases.

Price to Intrinsic Value is the cornerstone investment discipline of our firm. We review the securities in the Price to Intrinsic Value database that we use on a weekly basis to ensure that our calculation of relative values uses accurate inputs. As a group, our investment committee will determine if growth rates, quality ratings, and normal earnings are correct in the model and adjust them as needed. This is the base we use for all of our actively managed products. We have found that it works well. Although past performance is not indicative of future results, historically the cheapest third of the S&P 500 outperforms the most expensive third over time. There can be periods where this discipline is not effective, but those periods tend to be short and are usually followed by a strong recovery in the discipline.

Our process selects the stocks that are in the cheapest third of the S&P 500 on a Price to Intrinsic Value basis. From this group of 167 names, we select those that meet one of our two other criterion. In addition to being attractively valued, they must either 1) exhibit good relative strength, or 2) exhibit good financial strength as measured by share repurchases. We rebalance this portfolio quarterly, and it generally yields a portfolio of between 40 and 80 stocks that represent attractively valued, high quality, large capitalization names that are either being well accepted by the market or are repaying investors for their investment.

This process yields a more aggressively positioned portfolio than our traditional Relative Value Equity since we impose no diversification requirements on the portfolio. It will more aggressively weight those sectors that are cheap with catalysts to realize those values. Think of it as living with higher return expectations, but needing to accept more volatility to attain those results.

Intrinsic Value Opportunity Full Description
Intrinsic Value Opportunity Investment Process
Intrinsic Value Opportunity Characteristics
Intrinsic Value Opportunity Performance
Intrinsic Value Opportunity Product Summary
Back to Products Page