STRATEGY

THE PORTFOLIO

At Anchor Bay, we take a bottom-up approach to investing. We’re interested in growing revenues and earnings—and doing it consistently—while avoiding the rollercoaster of ups and downs.

We select companies that fit our approach based on fundamental metrics that may include price to earnings, price to cash flow, price to book, price to revenue and dividend yield. This informed analysis is based on a number of different factors, including capital structure, management records, industry dominance, SEC filings, computer databases, industry publications, general and business publications, brokerage firm research reports and other information sources.

Once we decide to invest in a company, we don’t just sit back and ride it out. We are constantly analyzing its performance and making adjustments based on current market conditions. The goal is to do our best to make sure the companies in our portfolio show the promise of future appreciation. There are a variety of reasons a portfolio manager may decide to sell a company, including identifying a more attractively priced company as an alternative or determining that the fundamentals of a business have changed. This constant monitoring and amending of portfolios is the reason we can achieve such an impressive track record of minimizing risk while generating maximum returns.

THE STRATEGY

At the core of our investment strategy is a desire to focus on preserving investor assets, while meeting cash flow requirements, and generating a reasonable return. We believe in focusing on good companies with a history of solid dividends, income growth and the potential for long term capital appreciation.

To further generate income, from time to time we may utilize covered-call options to enhance cash flow. We are one of the very few investment advisors who seek to add income potential through the use of covered calls.

Today’s reality is that we continue to live, and invest, in a time of uncertainty. Which is why it’s more important than ever to build a portfolio that can withstand these unpredictable times. Building a sensible portfolio strategy includes understanding the risk and reward of each asset, the role of each asset in the portfolio and the ways in which assets interact with each other.

Beyond assessing risks and rewards, we have a fiduciary responsibility to our clients. The word “fiduciary” is defined as “someone who is managing the assets of another person and stands in a special relationship of trust, confidence and legal responsibility.” A word that goes hand in hand with fiduciary is “prudence,” defined as “careful management.” In our industry, these words—fiduciary and prudence—are used liberally. But at Anchor Bay, they are far more than just catch phrases of the day: They are the cornerstone of our business and investment philosophies, and they influence our day-to-day management of client portfolios.

Managing portfolios to withstand various scenarios is as much art as science. In shielding our clients from one scenario, we expose them to others. The key is to strike a reasonable portfolio balance that allows us to meet our clients’ risk-and-return objectives over the long term. But part of being intellectually honest is acknowledging that there are many unknowns, and we do not have a crystal ball. Therefore, we are prudent in every action we take as a fiduciary. This is the investment discipline that has served our clients well over the long term.

ASSET ALLOCATION

Asset allocation is a process where the right investments are selected to meet your needs. It’s one of the most critical keys to long-term investing success. Over the years, our recommendations have added significant value to our clients’ portfolios while protecting against market volatility and unnecessary risk. Time has proven two things when it comes to investment portfolios: various investments perform differently over time; and a well-diversified portfolio can help offset the risks associated with the ebb and flow of the markets.

Building a well-diversified portfolio begins with asset allocation—the distribution of assets among different asset classes, such as stocks, bonds and cash equivalent instruments.

Anchor Bay investment professionals devote a great deal of time to the study and practice of asset allocation, primarily because a diversified investment plan offers many advantages to our clients, including the potential to:

• Provide more consistent long-term performance
• Reduce overall portfolio risk
• Smooth over the impact of market volatility