Diversified Value

Investment Objectives

The "U.S. Diversified Value" equity  strategy strives to produce  superior  investment returns  over time relative to the S&P 500  Index, with a dependable higher level of dividend income.  The strategy strives to select a well diversified portfolio of companies from both an industry sector and market capitalization standpoint, which have either consistently paid a dividend, or, in our analysis, have the ability to consistently pay an increasing dividend.  In addition, the strategy initially selects companies at attractive valuations with the intent of owning them for an extended period of time averaging several years.  As a result the returns have generally been tax-advantaged long-term capital gains. 

Investment Guidelines

WCB seeks to identify financially sound, publicly traded companies that are predominantly included in the S&P 500  Index.  The proprietary strategy is based on fundamental analysis emphasizing strong balance sheets, superior cash flow, and attractive valuation.  Because the stocks are selected from a group of financially strong U.S. publicly traded companies, they are well known entities and afford substantial liquidity.  The companies are initially equally weighted in a portfolio of 40-50 stocks, diversified among industries and sectors.


Fundamental Revenue Weighted Indexation

WCB offers separate account, fundamental equity indexation based upon individual company revenues utilizing a methodology licensed from an unaffiliated independent contractor to provide certain Revenue Weighted Indices.  Fundamental indexation, which determines a security’s weighting in a portfolio based upon the company operating fundamentals rather than market capitalization, is a more rational basis for portfolio construction. Revenue weighted indexed portfolios hold the identical securities as the more popular capitalization weighted indexes, only in differing amounts.   

Revenue weighting in portfolio construction minimizes the overweighting of companies whose over allocation results from being based solely on their stock prices, sometimes having run up to extreme valuations constituting an outsized proportion of the portfolio, and are thus vulnerable to corrections (Apple in September 2012).  Historical attribution analysis indicates that by minimizing the overweighting of overpriced stocks, the revenue weighted alternatives have very slight value and smaller cap tilts, which are characteristics of superior performing portfolios over time.  

 In our opinion the revenue weighting methodology is superior to other fundamental indexation strategies that utilize accounting metrics such as earnings, cash flow, book value, etc, which are subject to the inefficiencies and manipulations provided through generally accepted accounting principle loopholes.  Revenue, as determined by S&P’s propriety measure, is the purest metric, least subject to distortion among the other fundamental indexation accounting alternatives.  In addition, research has indicated that revenue tends to anticipate earnings while market capitalization tends to follow.  

The separate account structure allows for securities lending and customization for social or religious restrictions.  It also provides low turnover and excellent liquidity.  In the case of account contributions or withdrawals in between quarterly adjustments, the real-time access to the database and S&P’s proprietary divisor maintains portfolio balance without having to wait for S&P’s periodic reconstitution. 

WCB offers Revenue Weighted Fundamental Indexation management in U.S. Large Cap (S&P 500), Midcap (S&P 400), Small Cap (S&P 600) alternatives, as well as International (EAFE).