Concentrated Equity Income

Process and Philosophy: Quality – Discipline – Focus:

The Concentrated Equity Income Strategy is a product of the team’s rigorous investment process designed to identify and invest exclusively in high quality, advantaged companies with a strict valuation discipline and a preference for paying cash dividends. The team first identifies a business characterized by their ability to generate predictable growth and cash flow to establish an investable universe of high quality, advantaged businesses. Companies with a preference for high dividend income and low volatility characteristics within the team’s “advantaged business universe” become the key candidates for portfolio consideration. They then apply a thorough valuation methodology to the “high income” portfolio candidates using discounted cash flow and scenario-based analysis to determine optimal entry points that adhere to a strict valuation discipline based on a 30% discount to estimated intrinsic value ranges. The team’s accumulated understanding of the fundamental factors that they believe drive long-term intrinsic value growth of a company along with their focus on understanding end market exposures, provide them with the conviction to meaningfully allocate capital to each portfolio position. The result is a deliberately diversified portfolio of 25 investment opportunities in which the team has high conviction and in the aggregate generates a dividend yield in excess of the S&P 500 and Russell Top 200 indices.

The Concentrated Equity Income Strategy is designed to invest for income and capital preservation. The strategy provides investors with access to companies that the investment team believes have structural, competitive, and economic advantages relative to competitors; are conservatively capitalized; and differentiated from the Partners” Advantaged portfolio holdings by their preference for paying high cash dividends.

Equity Income – Dividend Yield Sustained by Advantaged Businesses: Portfolio Composition

• Portfolio consists of large capitalization, high quality advantaged businesses with dividend yields in excess of the S&P 500 and Russell Top 200 indices average yields.
• Each separate account owns 25 equal-weighted individual securities that represent our highest conviction opportunities for income and capital preservation.
• Portfolio seeks prudent diversification of dividend income/yield opportunities based on the end market exposure of the businesses owned versus the S&P 500 benchmark sector weights.
• Targeting long term (+3 years) investment theses – portfolios have historically produced low turnover and lower volatility.

We take an opportunistic approach to equities, seeking to identify companies with strong prospects for sustainable growth. The foundation of our approach is the development of a “warranted P/E” for each company based on our assessment of the company’s return on capital, comparative growth rate and how long we believe the company can sustain this rate of growth.