Managing Equity Investments
Objective: Produce Consistent, Risk-Adjusted Returns
Core Equity
Cedar Hill builds diversified portfolios for clients that are composed of companies that have attractive growth prospects relative to valuation, or are undervalued relative to their net asset value.
We evaluate these companies based on quantitative metrics as well as qualitative assessments of corporate management, business strategy and macro factors impacting the industry. Cedar Hill also analyzes an investment’s risk before addressing the potential return opportunity.
Other factors include a company’s profitability, financial resources, market position and the track record of the management team. Additionally, we assess the competitive landscape within the industry, identifying key macro trends as well as economic, political and regulatory risks. We determine valuation by using internally generated earnings and cash flow projections.
Fundamental Research Complemented by Thematic Investing
Our investment methodology is rooted in fundamental analysis, which involves analyzing a company’s financial performance to make assumptions about its future prospects.
We complement our quantitative and qualitative analysis of individual companies, however, with a broader assessment of macroeconomic and industry trends that could influence performance. For example, we may explore broader investment themes, such as the aging of America or the impact of the rapidly growing middle class in emerging markets, and look for companies that are well-positioned to take advantage of these themes.
Adjusting Investment Positions
We develop price targets for each company in the portfolios we manage and reassess these positions based on business and economic trends. Portfolio positions may be scaled back or eliminated when one of the following conditions occurs:
- The company’s stock has met our price objective.
- Another position offers a better risk/reward equation.
- Deterioration in the business or industry has made the company susceptible to a permanent impairment.
Sound, Consistent Returns
By creating a diversified portfolio in this manner and performing thorough analysis throughout the life cycle of each investment, our core equity portfolio is designed to produce sound, consistent, risk-adjusted returns.
Equity Income
Cedar Hill’s Equity Income portfolios are composed of actively managed portfolio stocks that have a significant income component, sometimes tax advantaged. Yields on these investments far exceed bonds or dividends from traditional stocks. Investments may include Master Limited Partnerships (energy infrastructure), Business Development Companies (lending to middle market companies), preferred equities, covered call strategies and other high income producing securities. In addition to current income, the strategy offers additional return potential through share price appreciation. Downside is not as exposed to interest rate increases as traditional fixed income.