Arcataur Large Capitalization Equity Portfolio Strategy:
Our strategy for the Arcataur Large Capitalization Equity Portfolio is to maximize expected return while reducing risk by constructing diversified portfolios with exposure to most major industry sectors. We invest in high quality companies that have sustainable growth to compound returns over long periods of time. Most companies will have market capitalization in excess of $10 billion.
Our equity investment process begins with a top-down approach, where we start with a macroeconomic analysis, including a focus on all sectors and industries, to emphasize areas that we expect to benefit from the current and prospective economic environment. We then perform fundamental equity analysis on individual companies, emphasizing their competitive positions within their respective industries. We focus on leaders or emerging leaders in these industries to lever the portfolio for out-performance versus broader market benchmarks. Dominant market share, strong financial position, unique products or services, low cost operations, significant free cash flow and appropriate stock valuations are critical variables we look for in the companies in which we invest. Financial and operating quality are then considered to provide a greater margin of safety and stability to the portfolio. Valuation is evaluated to avoid overpaying for the company. Once we reach our investment conclusion, technical analysis is used for optimal timing and pricing decisions.
Our strategy then looks at ways to maximize expected return through constructing diversified portfolios utilizing the “65/15” principle. On average, this portfolio could hold 65 stocks; however, the largest 15 could account for as much as 45% of the portfolio’s market value. The direct stock portfolios may be augmented with large capitalization index based equity exchange traded funds (ETFs) for liquidity or for lower dollar value accounts to achieve proper diversification when needed.