Appleton Large Capitalization Equity
An underlying tenet of our investment philosophy is that every economic cycle has similarities to prior cycles, yet each cycle is unique. Differences in stock market cycles are even greater. As a result, our process focuses extensively on the uniqueness of each cycle in both Macro and Micro terms.
MACRO We consider the myriad of factors dominating the global and domestic environment: Federal Reserve policy, fiscal policy, inflation, nominal interest rates, real interest rates and other domestic and global forces that make a specific cycle unique, demographics, for example. We also assess overall profit expectations, where relative profits appear to have the best prospects.
MICRO We screen for stocks that possess characteristics that the market pays for: growing and preferably accelerating profits; unit growth whenever possible; relative pricing power; good margins; and companies that have a strong position within their market.
We build our portfolios with stocks that best meld the benefits of both perspectives.
Portfolio Objective:
Growth of nominal capital and preservation of real, after-taxes.
Investment Guidelines:
- INVESTMENT UNIVERSE: 85% of portfolio companies have capitalization greater than $3 billion. Up to 15% in smaller, special situations.
- EARNINGS GROWTH: Earnings growth for the total portfolio is expected to be greater than the market overall, both historically and prospectively.
- VALUATION PARAMETERS: Most stocks have broad valuation ranges within which they operate. Most of the time other factors, primarily relative earnings, dominate stock price changes.
- RESEARCH: Each new idea is presented by a research analyst for review before purchase.
- TECHNICAL ANALYSIS: Used to help confirm the appropriateness of a purchase and as a leading indicator of prospective fundamental deterioration.
- SELL DISCIPLINES: Follow the weight of evidence for items such as deterioration in earnings expectations, shift to extreme valuation levels, stock price trend deterioration, better idea, major fundamental change in reason for owning stock.
- DIVERSIFICATION: Portfolios are well diversified by sector, industry, economic driving force for earnings, and number of names.
- POSITION SIZE: Normal maximum position with appreciation is 6% at market.
- REVIEW: Portfolios are reviewed regularly for conformance to investment policy and client objectives.
- BENCHMARK: Russell 1000 Growth