Strategies and Performance

Willingdon Views

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Current Strategy

Top 10 individual holdings
Financial Sector ETF BlackRock Inc.
Apple Inc. Raytheon Co.
Google Dycom Inds.
Schlumberger Ltd Becton Dickinson
Marriott Intl. Facebook Inc.

The overall market corrected a bit in August, but is still hovering close to all-time highs.  On a year-to-date basis, Technology and Health Care are the leading sectors, reflecting the acceleration in the growth-oriented sectors of the market.  Energy is far and away the worst performing sector, but could be due for a near-term recovery.  Congress and the Trump administration have yet to prove that they can work together effectively to pass much-needed tax reform.  Not surprisingly, expectations regarding the prospect for lower taxes for corporations and individuals have fallen significantly.  Nevertheless, lower taxes and less government regulation remain powerful potential catalysts for a continued advance in stock prices.  In terms of the latter, the administration has successfully rolled back numerous regulations especially in the energy and financial sectors, which should result in stronger economic growth in the future.  In the meantime, our strategy is to take advantage of the continued volatility in order to either take profits in current holdings or find undervalued stocks to buy.  Discipline and patience will be crucial during these uncertain and volatile times.  Over time, we will search for more sustainable trends of which to take advantage in our stock selection process.  While there is certainly reason for optimism regarding the growth potential of the economy and stock market with a “business-friendly” administration in place, much depends on their ability to accomplish the task before them. 

core equity strategy

We utilize a time-tested, three-stage process for constructing equity portfolios. Our analysis is top-down driven with a strong emphasis on identifying quality based on peer-to-peer analysis in each industry and sector. Portfolios typically include 30 – 35 stocks.

stage 1: qualitative analysis

We define quality as the sustainable competitive advantage a company enjoys over its competition. We have a checklist to assess competitive advantage including the following variables: product, price, service, management, cost position, market position, financial strength, strategic planning, technology, and execution. This is a dynamic process whereby different variables are given greater weight in some industries while given lesser weight in others. The key is to determine the critical driving forces in each industry in order to accurately assess the relative competitive advantages that each company may possess.

stage 2: top-down analysis

We identify long-term market drivers, or secular trends, which determine the sectors of the market likely to outperform and those likely to underperform the overall market. Based on this analysis we will position portfolios to hold a larger or smaller position in relation to the sector weights in the S&P 500.

stage 3: quantitative analysis

We utilize industry specific valuation methodologies to determine the upside and downside potential for stocks that pass our qualitative screens.Typically this involves approximately 200 companies. Valuation parameters include: Price/Earnings (PE), Price/Cash Flow (PCF), Price to Growth (PEG), and Price/Book Value (PBV).


We are continually retesting each holding in the portfolio in the context of our three-step investment process. We continually challenge our qualitative assessment as the competitive landscape changes in response to the economy or other market forces. Likewise, we review our overall top-down strategy on an ongoing basis through the various stages of the economic cycle. Lastly, through our quantitative valuation models we monitor the relative upside and downside of each individual stock in the portfolio.

Our sell discipline flows from our three-step process as follows: First, if the company loses its quality – no longer has a sustainable competitive advantage vs. its competition it would be a candidate for sale. Second, a change in our top-down strategy may lead to increasing exposure in one sector and reducing exposure in another sector. Third, if a stock becomes over-valued based on our valuation analysis it may be a candidate for sale.

Diversified Portfolios

Our focus on high quality, industry leading companies results in a well-diversified portfolio of global corporations. In today’s global economy, strong companies must compete on a worldwide platform. As a result, we analyze investment trends and search for opportunities not only within the U.S., but also in international and emerging markets.  Many of the holdings in our core portfolio generate more than 50% of sales outside of the United States.  

Our focus on industry leaders often leads to opportunities in small cap and mid cap companies.  This balance of large cap, mid cap, small cap, international, and emerging markets provides solid diversification and growth opportunities for our clients. 

This investment strategy is not a recommendation to buy or sell any of the securities mentioned.  Past performance is not a guarantee of future results.