Our Investment Philosophy
As portfolio managers and research analysts with decades of experience, Mr. Knox and Mr. Downing developed an investment philosophy anchored by core fundamental principles. These principles are the standards by which we review the quality, value, price and long-term potential of different asset classes. Whether a client’s unique objectives call for a portfolio of individual common stocks and bonds, exchange traded funds, mutual funds or some combination thereof; we subject all investments to a thorough examination of the potential risks and returns. We are long-term investors with the patience born of experience.
We believe successful, long term equity investing requires a diversified portfolio of high quality common stocks purchased at reasonable valuations. Companies that consistently provide strong returns on invested capital with growing revenues, earnings, and dividends, and whose securities are available at reasonable multiples of earnings and cash flow, comprise the core of our client portfolios. The stocks of more cyclical companies may be included in the core portfolio when we believe their valuation represents an opportunity for sizeable returns. In addition to the common stocks of companies domiciled in the United States, core portfolios may include common stock of foreign companies traded on domestic markets.
When the client’s investment objectives dictate the use of fixed income investments, we typically build a core bond portfolio using individual high quality government, agency, corporate, or municipal bonds. Generally our bond portfolios are constructed with “laddered maturities” and maintained with relatively short durations. Where appropriate, we may use bond mutual funds and exchange-traded funds when these investments seem more appropriate for an individual client.
Despite many claims to the contrary, history shows that it is extremely difficult to consistently provide “better than market” investment returns with a diversified core portfolio. We believe that subject to the individual client’s investment objectives, risk mitigation and return enhancing strategies may be appropriate to include with the client core portfolio. Knox and Downing may use low cost exchange traded funds and mutual funds to provide investment access to such sub-asset classes as small and mid-sized domestic or foreign companies, real estate and high yield bonds among other investments that we believe provide the potential for either risk mitigation or return enhancement. Please contact us to explore how our approach might fit your individual investment needs.