Broker Check

Investment Management

When I first became an investment advisor, the investing climate was much simpler. You could assemble a portfolio of approximately 15 to 30 stocks and 5 to 10 bonds, and you would have a very nice performing portfolio that is balanced.

However, in and around year 2000, the investing environment began to change. Accounting and financial shenanigans within companies bubbled to the surface. Enron, Tyco, and Worldcom are just a few examples that come to mind. The macroeconomics of the global marketplace was beginning to change as well. I felt that an economic point of view had to be incorporated in the portfolio management decisions.

  1. Step 1: Assessment of the Macroeconomy
    We begin with an assessment of the global economy. Through research collaborations with Oxford University and others, we examine and analyze the economic data that we feel will impact the securities markets.

  2. Step 2: Asset Allocation
    Once we have a viewpoint on the macroeconomic picture, we look towards constructing a portfolio of securities based on one of the four Benefit Financial Services Group proprietary models. The models and their characteristics are more fully explained under strategies. The different strategies used by us differ in their risk characteristics. At this stage, we use risk assessment tools to assess your risk tolerance or use a model that I developed as part of my Oxford dissertation. In any case, we assess your tolerance for risk and construct a portfolio that is appropriate for that risk.

  3. Step 3: Security Selection
    We begin our primary security research by combing through corporate annual reports, reports filed with governmental agencies and selected research from others. For ease of analysis, we divide the stock selections in order of market capitalization. However, in reality, it doesn't matter to us if a company is small or large. We are investment managers who don't like to be restricted according to how we fit in a category, style, or box.

    The majority of our investments are in individual securities, both equities and stocks. However, from time to time, we will use funds or exchange traded funds where we think they are more appropriate. In general, we use individual securities for the most part.

  4. Step 4: Portfolio Review
    We review all the portfolios on a weekly basis and make changes as appropriate. However, we are not traders, but long term investors. Therefore, our portfolio turnover is low, unless circumstances such as the financial meltdown of 2008 would otherwise dictate. We review your portfolio with you at least once a year. If you would like to review your portfolio more often, we are more than happy to do so.


Stock Selection

Benefit Financial Services Group's approach is to buy stocks when they are undervalued in the market. These stocks usually tend to be misunderstood and neglected. This approach is followed by many successful practitioners yet it differs somewhat from that of some of our peers, in that we will not overpay for the prospects of growth. The market usually overpays for growth, but high growth stocks have two drawbacks. First, they suffer from high mortality – that is, often the growth does not continue long enough after it has been recognized – and second, you can often get a better total return from a slower growing company that is misunderstood. Some of the criteria that we look for in stock selection are:

      • A sound balance sheet.
      • Satisfactory cash flow.
      • An above average return on equity.
      • Superior management.
      • A good outlook for continued growth.
      • An attractive market in which to operate.
      • Reasonable price-earnings multiples relative to the rest of the market, the industry group, and the historical valuation level of the stock; high price-earnings multiples are generally avoided.
      • Potential acquisition candidates.
      • Substantial assets that are undervalued or not fully reflected on the company's books.

Bond Selection

Benefit Financial Services Group's value-oriented, risk averse investment approach is clearly reflected in the type of fixed income securities we select for client portfolios, whether taxable or tax-free. We concentrate on issues with a number of common features:

    • Short to intermediate term maturities, providing us with the flexibility to minimize interest rate risk.
    • Superior credit ratings as determined by Moody's and Standard & Poor's.
    • Undervaluation relative to issues of similar quality and maturity, identified by use of proprietary and quantitative computer techniques.
    • High liquidity.
    • Low volatility, yet competitive yield.