Equity Philosophy & Investment Process

As participants and diligent observers of the capital markets, we search for investment values. In so doing we strive to deliver excellent, risk-adjusted investment performance in well-diversified, customized portfolios. We strongly believe in communicating regularly and proactively with our clients about their investment portfolios and seek to educate them about the capital allocation process.

Investment Philosophy and Portfolio Construction

Portfolios are structured based on our outlook for the market and our opinion about the relative attractiveness of each asset class and market sector. Every portfolio is structured and managed independently according to each client’s specific personal financial circumstances. We start with top down analysis to judge relative risk versus return:

• Where are we are in the current market cycle?
• What sector(s) are positively impacted by the economy today?
• We identify those themes that will attract capital over the next market cycle.
• How will politics and legislation affect the markets?
• What is the current Federal Reserve Bank policy?
• What is the current technical landscape of the market?

Inverness’ independent research winnows to a universe of approximately 200 companies that meet our strict investment criteria. Our equity holdings are typically large capitalization companies and global market leaders. Depending upon our economic and investment outlook, we may take a number of months to fully invest our clients’ capital. Portfolios are under or over-weighted into at least seven diversified major market sectors and we typically hold 25-45 stocks in a portfolio, depending upon client and market circumstances.

Typical Characteristics of Our Equity Holdings:

• We focus on high quality, financially strong, low debt, high cash flow companies in understandable businesses with proven, shareholder-friendly management.
• We seek to buy at the lower end of a company’s 5-year historic ranges of price to earnings and price to cash flow, provided there is a catalyst to grow these earnings and cash flow over the next 3-5 year period.
• We prefer to purchase issues that show above-average technical strength.

Inverness does not follow the investment crowd and we often find it profitable for our clients to take a contrarian stance. We avoid situations we do not understand and those issues with high levels of economic, political, or legal uncertainty. We also use high-quality mutual and exchange-traded funds (ETFs) to further diversify client portfolios or to concentrate exposure to particularly attractive markets or sectors of a market.