STOCKS

Our Method for selecting stocks begins with a top-down analysis of current and future economic conditions.  Once we have determined the economic climate, we decide on a total portfolio for our equity component.  Next, our focus is on diversifying between domestic and international.  Primary consideration is paid to the political and monetary environment of the countries we decide to invest.

 

We choose specific industries and sectors that appeal to our determination of where we fall in the business cycle.  While we tend to overweight sectors based on our broad outlook, we do not rule out taking positions in non-favorable sectors if valuations are low or the potential for growth is significant.  Finally, we utilize our proprietary screens based on fundamental and technical analysis to determine which individual stocks we will buy for our portfolio.  We use many different metrics along with our proprietary Conscious Trend Analysis inidcator.

 

We typically allocate between 25-75% of our portfolio to stocks but we may depart from these percentages under extreme market conditions.

 

BONDS

In order to choose the bonds for our portfolio, we follow a very similar strategy to our equity selection model.  However, specific attention is paid to the duration of bonds being considered.  The risks associated with quality, interest rates, inflation/deflation and reinvestment considerations all weigh heavily within our decision process.

 

Our bond investments are typically investment grade but we will take positions in below investment grade if we have reason to believe the rewards outweigh the risk.  We do a very careful analysis of financial sustainability for any issuer under consideration.

 

We typically allocate between 25-75% of our portfolio to bonds but we may depart from these percentages under extreme market conditions.

 

COMMODITIES

We believe that asset allocation would not be complete without exposure to commodities.  We seperate gold from the rest of commodities because we feel that gold provides more significant protection in the event of inflation and runaway monetary policy, but it can also provide a hedge against deflation and other disaster. 

 

We may take direct position in the commodity markets via exchange traded funds.  Other times we may use highly correlated stocks to avoid contango and backwardation in the futures markets.  We will take positions in all commodity related markets but we primarily invest in energy, grain, and metals.  Our managers look for extreme value related to the commodity markets that appear over time due to various economic factors.

 

We typically allocate between 5-20% of our portfolio to gold via a mix of bullion and mining stocks. Our target weighting in other commodities is roughly 0-10% and includes weightings in direct commodity producer stocks.

 

CURRENCY

While we primarily invest in US dollar denominated markets, we will invest directly in foreign currency markets through currency exchange traded funds, foreign bonds, and locally traded stocks.  Typically, our direct investment in currency products is used as a diversification strategy.  We are firm believers that investors need exposure to foreign markets that allow for non-US dollar related exposure. 

 

We typically allocate between 0-10% of our portfolio to foreign currencies.

 

ALTERNATIVE STRATEGIES 

In addition, we will employ strategies to hedge our exposure in all of the above mentioned markets.  Typically this is done by buying inverse exchange trade funds.  These funds allow us to reduce exposure rather than sell out completely.  We do not have a target weighting for our hedge positions.  Our standard guidelines for portfolio weightings will dictate our position size in our hedging investments.

 

Hedging is a vital part of our strategy and is much more advantageous as it reduces unnecessary commissions and capital gains.