Equity Management

Domestic Equity

The Diversified Value equity strategy is an actively managed value strategy that strives to produce superior investment returns over time relative to the Russell 1000 Value Index.  The strategy emphasizes cash flows rather than earnings-based metrics with the intended result of a portfolio with a dependable higher level of dividend income. The strategy forces diversification among sectors, striving  to select a well-diversified portfolio of companies from both an industry sector and market capitalization standpoint, who have either consistently paid a dividend, or in Barksdale Investment Management’s analysis, have the ability to consistently pay an increasing dividend. In addition, the Diversified Value equity strategy 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 predominantly been tax-advantaged long-term capital gains.

The philosophy is based upon the power of compounding dividends. Generally, superior long-term equity returns result from the ownership of high quality companies purchased at attractive valuations that also consistently maintain sufficient revenues and free cash flow to the degree that they could not only pay a dividend but could increase their dividend payments if they elected to do so. The selected companies on average pay an initial dividend yield averaging 100-200 basis points above the benchmark. These companies tend to be slower growing entities that do not necessarily need to plow back cash into their own business in order to fund their growth. As a result, they tend to be larger, blue-chip companies, which are held in the portfolio for several years at a time. Short term earnings and growth are less important with this discipline. There is a value tilt to the Diversified Value equity strategy. Due to the long holding periods, it is important to add companies when valuations are attractive; however, these measures may or may not coincide with traditional valuation measures such as price to earnings or price to book.

There is no market timing as portfolios are fully invested, utilizing approximately 50-60 relatively equal weighted stocks.  All index sectors are represented with portfolio sector weights generally within 2 or 3 percentage points of the index sectors. Industry weightings within sectors are considered but there are no restrictions.  Since turnover averages 20-25% annually, the importance of insightful trading techniques or technical analysis is minimal.

Barksdale Investment Management has a long history as a fixed income firm specializing in corporate bonds. The portfolio management team has applied to equity securities an analysis of company cash flows much like the one that they utilize in evaluating corporate fixed income credits. The strategy strives to results in long-term oriented, high-quality, and highly diversified value portfolios that have very low turnover. The stated objective involves taking a long term view based upon balance sheet sustainability more than the income statement. Barksdale has the unique freedom of not needing to rely on factors such as earnings, earnings estimates, or even the stock price in the short to intermediate term.

• Diversified Value

International Equity

The philosophy of the International Deep Value strategy is to seek to create a portfolio comprised of the most attractive valued stocks in the world, outside of the United States, and subject to adequate trading liquidity. There are no constraints as to country, sector or industry and the strategy does not time the market.