Our Approach to Investments

We believe that everyone’s portfolio strategy should be based on their own investment objectives, personal interests, and core values. As a result, we do not have a “right” portfolio, but use a wide range of approaches to create personalized portfolios for each client.

Whether you’re investing for the first time or have millions in assets, our Dallas-Fort Worth office has decades of experience servicing clients from all walks of life. Reach out to us today to schedule your complimentary discovery call.

Portfolio Categories

We manage a wide variety of strategies to suit client needs and personal interests, regardless of portfolio size. Our global investment team builds portfolios with tax efficiency, cost and sustainability in mind, allowing clients to build a portfolio that works for them.

Our categories include:

Popular: The five to six strategies we believe are best suited for current markets. These are our preferred tilts for the next 18-24 months.
Single Stock: Baskets of 20-50 stocks that target specific investment themes or regions, built from a universe of 14,000 stocks using a systematic scoring framework. Direct ownership of individual company stocks with zero 3rd party costs.
Funds & ETFs: Low-cost and diversified strategies across equity, fixed-income and commodity markets. ETFs allow us to avoid concentrated bets, target preferred exposures and keep overall costs low.

Single Stock Portfolio Construction

We believe markets are mostly efficient and spotting one-off mispricings is a fool’s errand. Easy and instant access to information makes it all but impossible to pick the right individual stock at the right time. A systematic investment approach is required to take advantage of the minor inefficiencies that do exist.

Ours follows a three-step process:

Identify the Universe: Define the portfolio’s objective and identify stocks that fit into the relevant universe.
Apply a Consistent Framework: Don’t ignore investment principles to include a popular stock. Systematically rank the universe via a 30-factor framework that includes Valuation, Quality, Safety, Payout, Technical, Sentiment, and of course, ESG, measures.
Build and Maintain: Select the highest-scoring stocks to get desired regional and sub-sector exposures. Qualitatively adjust for areas that systematic screens cannot capture. Review the universe, stock rankings and rebalance regularly.¹

Fund & ETF Portfolio Construction

Funds and ETFs provide diversification that single stock portfolios can’t. We first identify the portfolio goal, then desired market exposures, and ultimately the best funds and ETFs with those exposures. Quality and explainability of performance, total cost, liquidity, tax and structural implications, and manager transparency are key.

These portfolios fall into 3 broad categories:

Core ETFs: Global diversification at low cost allows investors to “set and forget” their exposure. Customized for clients’ risk tolerance, tax and currency objectives. Managed to participate in markets and seek improved returns via style and thematic tilts over a full market cycle.
Thematic ETFs: Specific themes without concentrated bets. Typically used to complement exposure elsewhere and not driven by clients’ risk objectives. These portfolios provide specific exposure for high-conviction views.
Active and Alternatives: Some investment goals cannot be accomplished via stocks and ETFs. In such instances, we turn to Closed End and Private Funds for market access. Contact us to see if such strategies are suitable for you.

Direct Equity Factor Model

We utilize a factor model that relies on decades of academic research into market drivers. If multiple papers have not been published and peer reviewed on a particular factor, it is not included. If only one metric works for a factor, it is not included. If it works only temporarily, or in a specific region/sector, it is not included.

In total, our process scores ~14,000 stocks daily across 7 categories:

Value – is a stock cheap relative to peers on a variety of measures?
Safety – how does it compare on debt, distress, volatility, liquidity and other defensive metrics?
Payout – what is the income/yield profile?
Quality – is it a consistently profitable, balance-sheet efficient company?
Technicals – does it show signs of price and earnings momentum, reversal or cycle skew?
Sentiment – are insiders buying or selling, what are analysts and institutions doing?
Macro – how has it historically fared in macro environments like today?

No systematic approach is perfect and therefore we constantly look for ways to improve. In addition, no model or process can quantify all information (such as fraud by a CEO), so we add ESG scores from multiple agencies and a qualitative review by our investment team.

By quantifying and combining these various “return factors”, we aim to deliver a consistent approach to finding stocks, sectors and markets with winning characteristics. Based on evidence, not hope. While past performance doesn’t guarantee future returns, we are confident that this approach can work long-term, as it has over the previous few decades.

Looking back to 1996, constantly prioritizing the best-scoring stocks and avoiding the worst would have created a material improvement in returns. Below is a chart that shows 25 years of data, with the green lines showing performance of the top deciles of the market by factor score and the red lines showing performance of the bottom decile.

Direct Equity Factor Model

We utilize a factor model that relies on decades of academic research into market drivers. If multiple papers have not been published and peer-reviewed on a particular factor, it is not included. If only one metric works for a factor, it is not included. If it works only temporarily, or in a specific region/sector, it is not included.

In total, our process scores ~14,000 stocks daily across 7 categories:

Value – is a stock cheap relative to peers on a variety of measures?
Safety – how does it compare on debt, distress, volatility, liquidity and other defensive metrics?
Payout – what is the income/yield profile?
Quality – is it a consistently profitable, balance-sheet efficient company?
Technicals – does it show signs of price and earnings momentum, reversal or cycle skew?
Sentiment – are insiders buying or selling, what are analysts and institutions doing?
Macro – how has it historically fared in macro environments like today?

Looking back to 1996, constantly prioritizing the best-scoring stocks and avoiding the worst would have created a material improvement in returns. Below is a chart that shows 25 years of data, with the green lines showing the performance of the top deciles of the market by factor score and the red lines showing the performance of the bottom decile.

Disclosures:

Rebalancing/Reallocating can entail transaction costs and tax consequences that should be considered when determining a rebalancing/reallocation strategy.
Mutual Funds and Exchange Traded Funds (ETF’s) are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from the Fund Company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk.