Models
Proprietary investment strategies that utilize individual securities and ETFs to meet their stated objective.
Common Investment Categories with Uncommon Results
Our investment models are analogous to investment vehicles such as mutual funds or ETFs that you may already be familiar with. Similar to these types of securities, each of our models is comprised of individual holdings that are selected and supervised by our portfolio managers. Each model has its own defined strategy as signified by its name: Large Cap invests only in the common stocks of companies with a large market value; Dividend Growth invests only in the common stocks of companies that pay a growing dividend; and so on.
Where our models set themselves apart from the mutual funds or ETFs that you may have used previously is in their ability to allocate funds as we see fit, not as dictated by our ownership (as is the case for some index funds). We are able to use cash as an asset class to reduce volatility, or leveraged ETFs to increase returns depending on what market conditions are dictating. These changes are infrequent, but aim to step aside when the market environment is dominated by uncertainty.
Equity Models
Insignia
Investment Mandate:
Our Flagship Model INSIGNIA – is strategically weighted with Large Mid and Small cap stocks
Investment Objective:
This Tactical Growth Model is focused on providing capital appreciation for investors. Some securities may provide minimal dividend income, but it is not a factor in investment selection. Tactical management within the model aims to amplify gains during favorable market environments and minimize losses during unfavorable market environments.
Investment Discipline:
- At any given time, Insignia will hold a blend of common stocks strategically chosen and aims to generate returns mirroring the S&P 1500. We accomplish this by blending our Smarter Way “SW” Large Cap, Mid Cap, Small Cap models along with our Sector Rotation models which are reduced and replaced with our SW Diversified Fixed Income Model when market signals indicate a mixed or bearish market.
- Stocks are selected with our proprietary methodology use both fundamental and technicals considerations and compares to the underline weighted benchmark indexes as proxies.
- The Model weightings and total equity exposure of the SW Insignia Strategy depends on our Alpha & Omega market signals. When both signals are bullish, SW Insignia will be fully invested in our Equity Models. If the signals are mixed, 25% of the equity exposure is replaced with our SW Diversified Fixed Income Model. When both signals are bearish, 50% of the equity exposure is replaced with our SW Diversified Fixed Income Model.
- Insignias individual securities holdings are updated/rebalanced quarterly; the equity exposure vs the fixed income exposure is dictated by the Alpha and Omega algorithms.
Equity Income Models
Dividend Growth
Investment Mandate:
100% invested in dividend paying common stocks with no preference for geography or market cap.
Investment Objective:
Focuses on providing a rising stream of dividend income from common stocks that have a history of annually raising their dividends. This is designed to help offset the damaging effects of inflation. Investors not dependent on the dividend income immediately can reinvest their dividends to further amplify the rising dividends these companies already provide. A secondary objective is to provide capital appreciation comparable to that of domestic equity markets.
Investment Discipline:
- Dividend Growth remains 100% invested in a basket of 20 securities at all times. Since the primary focus of this model is dividend income and dividends are paid based on the number of shares owned, this model’s primary objective would be disrupted by moving to cash.
- When selecting the securities for this model, we ensure that each one has a dividend yield of at least 2%, has increased its dividend for at least 5 consecutive years, and has raised its dividend by at least 4% annually for the past 1 and 3 years. Once those criteria are met, we gather the relevant data to compare the fundamental and technical aspects of each security and use them to score each one. The highest scoring securities are placed in the model with some consideration given to replicating the sector weightings of large cap indexes. The holdings in this model are reviewed continuously.
- Once clients’ funds are allocated, positions will not be regularly traded. This is due to the rising dividends that we are hoping to benefit from down the road. Securities will be monitored to make sure that dividends are not cut or suspended, fundamentals remain solid and favorable for continued growth, and that the price does not become overly inflated relative to appropriate valuations.