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Our equity philosophy at Wind River Advisors can best be described as value based with an absolute return focus. We utilize a “best ideas” approach to invest across primarily large- and mid-capitalization stocks. Research has shown the returns from such “best ideas,” opportunistic portfolios overwhelmingly dominate the returns from rigid style-box portfolios. Returns are captured through disciplined purchase criteria and a favorable mix of exit strategies.

Target Return. We select stocks that we feel have a reasonable chance of returning a cumulative “absolute return” of 50-80% in the first two years after purchase. This hurdle rate is important in order to avoid allowing marginal ideas to creep into the portfolio and equates to a 22-34% per year compounded return, including dividends.

Value Focus. Value anomalies are generally outgrowths of behavioral, as opposed to financial, phenomena. Above-average returns prove to be enduring, not because they are particularly difficult to identify or to capture, but because of investor aversion. We emphasize stocks of companies with new incentives to outperform expectations (such as spin-offs), those experiencing encouraging business resurgence and demonstrating improving management resourcefulness (turnarounds), quality companies that are attractively valued due to temporary business or market factors, or stocks that are simply undiscovered and in the early stages of established sales growth, independent of the business cycle.

Exit Strategy. Your portfolio will normally hold 20 to 40 stocks with a time horizon goal of 18 to 36 months, or longer. While we are constantly evaluating the portfolio, three holding timeframes are especially important to us:

  1. Four to six months: we have found that if we buy a stock properly it will often return 25-40% in the first 4-6 months. In this situation, our analysis has concluded that it makes financial sense to lock in profits on at least a portion (typically, one-third) of the position. After six months we prefer to let the stocks run to long-term holding periods so as to enjoy favorable capital gains tax treatment.
  2. Eleven months: if a stock is not profitable and on the verge of going long-term for tax purposes, we will sell.
  3. Twelve to eighteen months: Stocks with long-term capital gains become core holdings (and may be held for several years) or are considered a source of funds at the right price. We regularly reevaluate the underlying company growth, stock valuation and other fundamentals.

Other investment philosophies include:


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