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Objectives
· Preservation of Capital
· Portfolio volatility less than the S&P 500
· Above market growth potential
· Above market current yield
Stock Portfolio Characteristics
· Dividend yields greater than the S&P 500
· Companies with strong franchises or niches
· Companies with good relative earnings momentum and positive earnings estimates changes
· Stocks with strong relative price momentum
· Good relative values: low P/E, low price to cash flow, low price to book, high ROE, and high dividend yield
Sell Discipline
Model Deterioration:
· Loss of earnings momentum leads to gradual revision deterioration
· Stock appreciation and/or Balance Sheet changes cause erosion in value model
· Insider /Short Sentiment becomes more bearish
Fundamental Shift:
· Negative Quarterly Earnings Surprises
· Corporate or industry fundamentals change in a way that drastically affects the present value of the business model
· Unethical conduct or suspicion of fraud
Tactical:
· Current price greatly exceeds our estimate of sustainable value
· Relative stock strength becomes highly negative
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