The Performance Driver

How Others Invest

To put things in proper perspective, it's important to know how others invest. The reality of Wall Street is that most investment decisions are based on a company’s past performance. This of course seems odd in light of the fact that the most common disclosure is “past performance is not indicative of future results” We in fact, agree with this disclosure and assent to its logic.

The real point is that when making investment decisions, there is nothing more important than information- accurate, untainted, unbiased information.

How We Invest

The driver of our asset allocation models is a proprietary trading strategy primarily influenced by specific insider purchases. Knowing that accurate information is of paramount importance when selecting stocks to buy, our initial screen for equity selection is that we require an open market purchase of significance to be made by the specific officers of the company we're analyzing.

Why Insiders?

An Insider, by definition is "a person or entity who is presumed by law to be privy to non-public information about the internal operations and plans of a corporation. An insider is usually an officer or director of a corporation, but may also be an advisor, broker, or a beneficial owner of 10% or more of a class of a corporation's stock. Insiders are required to report to the SEC, when they buy or sell their company's stock or options." We're particularly interested in purchases made by corporate Chief Financial Officers made on the open market at market price. (Please note: All information is obtained and used legally)

We believe that no one knows more about the financial health of a company than its Chief Financial Officer. The insiders we follow know in general:

• Accounts Payable/Receivable
• Reality of the Balance Sheet
• Potential Mergers and Acquisitions
• Future Changes in Corporate Strategy
• Potential benefits or harm from Micro/Macro changes in the economy
• When their company represents a value

Most importantly, they are responsible for sales forecasting on a quarterly basis for the CEO. Their "guess" should be a much better guess than an outside analyst. As mentioned previously, our initial screen requires an open market purchase to be made by Chief Financial Officers. There's certainly something to be said about paying more attention to what people do, than to what they say. Only after the open market purchase is made, will we begin to look at the company's fundamentals to determine if it will be added to our client portfolios.

This strategy serves as the driver to our client portfolios and is an all-cap, non-sector specific dynamically allocated portfolio. Although no strategy offers a guarantee or assurance of profit or loss avoidance, this strategy serves as the core for the greater majority of our client portfolios, therefore indicating our belief in our system.