At a Glance
Growth & Income Strategy
The William Allan Growth & Income Strategy’s (“WAGI”) objective is to obtain long-term total returns through a combination of income and capital appreciation. It invests primarily in equity securities of mid- to large-capitalization companies, but from time to time will also invest in fixed income securities. The proportion of the strategy's assets invested in equity and fixed income securities may vary according to market conditions. The WAGI seeks to generate positive returns regardless of the broad market environment, and has a goal of holding roughly 40 or less securities in a single client portfolio. Characteristics of companies selected for the WAGI strategy are as follows:
Strong products;
Strong industry;
Sustainable competitive advantage(s);
Strong management team;
Priced at a discount to its intrinsic value.
This strategy is a “buy and hold” approach. Securities are rarely sold, which emphasizes the fact that owning assets is a much preferred approach to capital appreciation and income generation than trading those assets. This strategy carries the distinction of larger weightings within a single equity position. A position is typically purchased with an initial weighting of 1-4% of the client portfolio. As time progresses and the equity security changes in value, more shares are bought to take advantage of dollar-cost-averaging and increasing the weighting of the security in the portfolio. It’s not uncommon for a single equity position to sometimes make up 10-15% of a client portfolio.
A key element to making this strategy work is exercising discipline over purchases. The technique for finding under-valued companies relies largely on the theory of Economic Profit. Companies stated accounting results are adjusted to reflect more of their economic performance. This is a "bottom's up" research approach, meaning we analyze a publicly traded company as a business. It’s William Allan’s belief that equities move higher (or lower) over the long-term based on their economic results and not accounting results.
Using in depth economic analysis, companies are valued as a whole and then compared to their market capitalization. If the market capitalization is below the company’s intrinsic value, the company is trading at a discount to its true value.
Making this strategy work also requires applying the investment tenets outlined on the previous page. This outlines the basic strategy and tactical components of the William Allan Growth & Income Strategy, which is our model for long-term investing.
