“LARGE CAP GROWTH”
The “Large Cap Growth” product is an actively managed, concentrated U.S. equity portfolio of 20 to 25 large-cap companies typically selected from the top half of the Russell 1000 Growth Index.
The portfolio is selected through the use of a highly disciplined, fundamentals based, analytic methodology driven by historic income statement and balance sheet data. WCB’s approach focuses on identifying companies with a superior and improving operating history. As such the resulting portfolio has a strong but not exclusive growth bias.
In order to achieve this, the equity portfolio management team splits the operating history of a portfolio candidate into four distinct time periods – twenty rolling quarters, twelve rolling quarters, four rolling quarters and the two most recent quarters. WCB’s specific set of income statement and balance sheet criteria and ratios are calculated for each time period and forward weighted. In addition the price action of the stock itself is a key factor. The equity portfolio management team performs this analysis in real time on a weekly basis.
Using this disciplined process the equity portfolio management team is then able to rank and order the stocks in this universe and to focus on the companies whose underlying fundamental trends have been consistently improving relative to the other companies in the market cap sector. WCB’s goal is to identify companies with improving operational trend characteristics coupled with that same characteristic in price action. In other words WCB seeks to identify companies that are improving their fundamental and operational position and results relative to their competition.
As this is a bottom-up, multifactor-driven model, there is no consideration of macro-economic forecasts, traditional Wall Street research or company guidance. Qualitative judgments are introduced as the final portfolio candidates are individually reviewed for any data discrepancies or any ‘hard’ news that might change the facts of the firm's analysis.
Following this fundamental analysis and ranking process, the equity portfolio management team will then drive portfolio candidates through WCB’s proprietary Protocol Trading platform in order to achieve optimal initial trade location for a new position in the portfolio. Many companies that are highly ranked on a fundamental basis will initially fail the Protocol test. If they remain in the research results in future research sets they will be re-evaluated using WCB’s Protocol methodology. WCB’s goal is to have an equally weighted portfolio but the equity portfolio management team often will leg into a new position over two to four tranches and observe the price behavior after each position entry.
Individual positions will be rebalanced at least twice per year and often each quarter, but the equity portfolio management team will let the winners run and fade before rebalancing them. WCB’s Protocol Trading platform will also allow the equity portfolio management team to exit a position whose market behavior is not in keeping with WCB’s fundamental analysis. That position may be re-entered if the fundamental analysis continues to improve and the WCB’s Protocol Trading analysis gives the equity portfolio management team a better trade location.