Long term we believe that well selected common stocks offer superior total return potential to all other financial investments. Our investment disciplines searches for value in traditional common stock investments. We offer two equity strategies to achieve these objectives: SELECTVALUE and INTRINSIC VALUE EQUITY.
In selecting common stocks we screen for the following factors: profitability, return on total capital, price to cash flow, earnings, and dividend yield. We then focus our in-depth analysis on these companies. A SELECTVALUE portfolio normally consists of the 30 most undervalued stocks from our analysis. We believe the SELECTVALUE discipline, consistently applied in an objective manner, will result in superior long-term investment success without assuming unnecessary risk.
INTRINSIC VALUE EQUITY:
Intrinsic Value Equity is an equity income strategy that seeks to generate growth of capital and an above average level of dividend income. We screen the large cap equity universe for companies that demonstrate earnings growth, strong cash flow, dividends, and solid balance sheets. The portfolio typically consists of the 30-40 stocks. Our target values (intrinsic value) are based on our estimate of a company’s long term competitive advantage versus the industry universe. We control risk by balancing sector and industry allocations.
Our fixed income investments represent the individual objectives of each of our clients. We recognize that for current income and capital preservation, bonds, both taxable and tax-exempt or preferred securities may be better suited than equities to the particular client needs and comfort level. When bonds are the investment of choice in a portfolio, we seek issues that offer special features in addition to their yield, maturity and quality characteristics. These special features generally offer enhanced total return or liquidity.
Mutual funds have become a major participant in many individuals' financial and retirement plan over the last decade. Recognizing this development, Needham Advisory has developed a consultation and no-load fund management program for those clients who prefer their investments to be in mutual funds. Our goal is to develop a program that reflects the client's risk parameters while offering adequate diversification and reasonable costs as represented by the funds' management expense.
Exchange Traded Funds (ETFs)
Exchange Traded Funds ETFs have seen significant growth over the last 10 years at the expense of mutual funds. By owning an ETF, you get the diversification of a mutual fund plus the flexibility of individual stock trading. ETFs replicate the return of an individual index, and we use them to increase diversification to other asset classes such as international, emerging markets, and real assets. We also use ETFs to increase weightings to various industry sectors. We research ETFs by trading volume, sponsor and expense ratio.
Sustainability Portfolios (ESG)
The last few years have seen a significant increase in sustainable investments by both individuals and endowments. The word ESG refers to environmental, social responsibility and governance practices by corporations. Its roots are in the older socially responsible investment movement that has evolved to the current movement to rank corporations by their ESG score as determined by special rating services. We develop our sustainable portfolios through the use of equities, no-load mutual funds, exchange traded funds and green bonds screened by sustainability grade and valued through our regular equity selection processes.