Relative Value 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. Bob Bordogna and Curt Scott are the team leaders for Relative Value Equity.

Every week the 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 those that meet the criteria for purchase or sale. A weekly research meeting is held for each product at TVAM.

Normally, two to three current positions will be reviewed in depth at each meeting. The in depth review will include verifying the inputs, evaluating the sector and economic conditions, review of the fundamental issues relating to the specific securities, and evaluation of alternative positions. Once the current positions have been fully reviewed the positions will be rated as hold, increase position, sell, or need to defend. Following the in-depth evaluation, the portfolio team will evaluate emerging candidates for purchase, identify issues to watch, and evaluate the market. An emphasis is placed on both technical and fundamental analysis. All current portfolio positions are written up in an executive summary and updated weekly for the meeting. Potential purchase candidates may be written up and followed for a period of time. Through this process, the portfolio is completely reviewed two to three times annually.

The sell discipline is the most critical of the process. Since all purchases are based upon consensus, or majority, there must be a sell discipline that institutes portfolio manager ownership of a position into the process. The sell discipline is invoked if there is not a consensus opinion to sell but the Price to Intrinsic Value of the security has risen into the most expensive 30% of the S&P 500, the fundamentals of the company have weakened, or a strong minority has doubts about the security. To defend the position, one member of the team must adopt the security and defend its inclusion in the portfolio at each subsequent research meeting. From this point forward, the "owner" of the stock is responsible for its inclusion and, therefore, its performance impact. There are three conditions that will override the team and force an automatic sale. Should the Price to Intrinsic Value of the security become 1.5 times greater than that of the market, as measured by the S&P 500, a structural negative appear, or the integrity of the corporate accounting become suspect, the security is sold immediately.

RVE Full Description
RVE Investment Process
RVE Characteristics
RVE Performance
RVE Product Summary
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