Objectives for the Fund Component of a Portfolio
The LCM Mutual Fund portfolio is designed to provide investment exposure to diverse asset classes. Equity fund portfolios are invested in a basket of no-load funds in the mid-cap, small-cap, and international arenas. Our core investment philosophy encompasses a mix of growth and value investment styles to ensure balanced returns through market cycles.
Objectives for the Fixed Income Component of a Portfolio
The LCM Fixed Income portfolio is customized to each client’s needs. Our team is experienced in both investment grade taxable and tax-free fixed income securities. The team actively manages the duration of the portfolio holdings to control risk, and to ensure the appropriate income or total return is being generated for each client’s portfolios. Depending on the clients’ objectives, we will invest a portion of the fixed income allocation into diversified mutual funds to gain exposure to less liquid areas such as high yield bonds. A variety of options are available for clients desiring fixed incomes. For those seeking tax-free income, we manage California tax free bonds, in addition to federal tax free bonds from all states. We also offer short term cash investment portfolios for those who need to access their cash within the next 2 years.
Objectives for the Equity Component of a Portfolio
The LCM Core Equity Portfolio seeks to maximize long-term capital appreciation. The portfolio invests in a diversified portfolio of common stocks of U.S. companies. LCM selects investments from companies in the mid & large cap arena. Highly speculative or illiquid stocks are not candidates for purchase. Risk control is an important element in the construction of the portfolio. To control risk, extreme overweighting or underweighting of the portfolio relative to the S&P 500 is normally avoided. To diversify, the portfolio consists of 30-40 equally weighted positions, each making up a small portion of the portfolio. In addition, we utilize risk management software to understand the relative risk of our holdings to the market. Risk is also controlled through disciplined purchases at reasonable valuations, and seeking out companies with projected above average dividend or cash flow generation which we see as protecting valuation.
Our Equity Buy Discipline
LCM employs a core investment philosophy in the management of the portfolio. The core approach provides an opportunity to invest in quality companies with superior earnings growth whose equities are selling at attractive valuations. Most companies under consideration have a special competitive advantage in their business, are focused on shareholder value, manage their business for long-term growth (not for quarterly reporting), employ a discipline in capital spending, have a business model focused on recurring revenue streams, and demonstrate the ability to generate significant cash flow. We establish a buy and sell target on our holdings based on either projected discounted cash flow valuations or multiples of earnings. This is a similar method employed by mergers & acquisition firms who buy businesses based on projected cash flow and projected returns on invested capital.