A: Most of our clients are investing for retirement, so the biggest risk we have to manage is to make sure that there is no permanent loss of capital. We are also concerned about their future cash withdrawal needs and how inflation is expected to affect their portfolios.
The other significant risk is market volatility. Investors are human and they tend to react to headline news with emotions. For instance, they may decide to sell their holdings at a time when the stocks are out of favor. One of our goals is to educate clients that markets are inherently fragile and prepare them for the market volatility. In fact, volatility can also be our friend and can take advantage of the market gyration to add selectively in the portfolio.
A: Our customized Separately Managed Account portfolios are constructed with the client’s investment objectives and risk tolerance in mind. Portfolios can be growth, which is an equity-only portfolio, aggressive growth, which is an enhanced equity-only portfolio, growth and income, an equity-only portfolio including growth stocks and dividend paying stocks, balanced, which is a portfolio of equities and fixed income securities, or a fixed only portfolio.
Portfolios can be domestic, international or a combination of the two. In the case of international equities and fixed income, we can use mutual fund instruments or ADRs.
When creating a portfolio we primarily consider the following factors: risk tolerance, growth objectives, current income requirements, and investment time horizon.
By employing a strategic asset allocation process, we form an appropriate blend of equities, fixed income and cash or equivalents. The aim of this process is to maximize long-term performance while minimizing volatility. We review our asset allocation on an annual basis at a meeting with the client. Of course, market conditions may require rebalancing of the portfolio to remain in compliance with client’s asset allocation.
For balanced portfolios, fixed income securities can provide a reduction of risk, reduce volatility and generate interest income. We may invest the fixed income portfolio in a diversified portfolio of fixed income funds.
A: We will sell stocks for a variety of reasons with the support of fundamental and technical analysis. In general, we trim positions that become more than 5% of the portfolio, and we sell if there are accounting issues, or earnings disappointment.
A: Our research process is driven by an economic view. We start with a macro-economic view and proceed to develop our views on various sectors in the economy. Such a process enables us to shape our additional research direction and specific security or stock research. Additionally, the economic outlook aids us in determining which sectors are most attractive at a given moment.
Then, we create a dynamic watch list of approximately 100 stocks from the universe of growth stocks whose historic earnings and/or cash flow growth is in excess of 15% over an economic cycle.
Criteria for inclusion on the firm’s watch list include positive earnings, appropriate debt ratios, market leadership, rising return on equity, increasing gross/operating margins and the alignment of managements’ interests with those of the shareholders.
As a further step, we employ valuation analysis, using a variety of fundamental tools supplemented by technical analysis, to choose the most attractively valued growth stocks from this internally generated watch list.
We typically choose 40 to 50 equities in each separately managed account customized to each client’s investment objectives. This number of securities allows us to diversify the risk and lower volatility while maintaining generally low portfolio turnover.
Our information collection process is varied and comprehensive. We review proprietary research, research reports from recognized sources, Securities and Exchange filings, company announcements and meetings, insider selling, breaking news, and other industry specific sources.
A: Based on our long-term growth philosophy, we look for companies whose profits are growing at 15% or more per year. We are looking for companies that are trading at valuation of no more than 50% more than the annual earnings growth rate.
A: Our investment strategy begins with a view of interest rates and inflation. We also review, but are not limited to, money flows in the economy and the markets, demographics, innovations, and political risk.
The investment process is intended to lead to the best sectors in which to invest. In these sectors we will do fundamental analysis to determine the best companies. We also take into account technical factors before making final investment decision. Because this process is intended to lead to investment in only the best sectors, the portfolio will not be weighted like an index fund, and can be expected to have significant variance from the benchmark, the S&P 500 index.
We actively monitor the portfolio and will eliminate underperforming securities in order to replace them with companies that offer greater opportunity. Companies that continue to grow as expected will be allowed to grow in the portfolio unless the portfolio becomes too concentrated, in which case even high-performing securities will be trimmed and the proceeds reinvested.
A: Our investment philosophy is to invest long term, in growing companies, with sufficient diversification to lower risk, and low turnover to reduce transaction costs.
We believe in being fully invested with a focus on sectors providing the best opportunities and companies that demonstrate strong growth fundamentals. Fundamental analysis and financial statement scrutiny are the foundation of our investment philosophy.
A: Rutherford Investment Management is a Portland, Oregon based investment management company. The firm serves individuals, pension funds and endowment funds with Separately Managed Accounts tailored to each investor’s risk tolerance, goals and timetable.
The firm specializes in constructing individually managed growth equity portfolios regardless of the market capitalization of the company. Portfolios may range from domestic equities only to global portfolios, or stocks only to balanced funds.