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 Naples Capital Advisors, (NCA) incorporates a global investment perspective encompassing U.S., EAFE, and the Emerging markets within a traditional, value-based portfolio management strategy. The process is designed, at its core, to identify undervalued securities that meet strict financial criteria, while emphasizing long-term ownership and low turnover. Part of NCA’s uniqueness stems from a willingness to relax artificially imposed constraints relative to geographic boundaries and capitalization, while simultaneously constructing portfolios that reflect the integrity of our valuation metrics. In other words, by expanding the opportunity set of securities to include global companies in a wide range of capitalizations, we are able to obtain reasonable diversification without compromising our valuation standards. It is our belief that the world’s capital markets are abundant with profitable businesses, talented leadership, and creative personnel. NCA’s philosophy, however, falls firmly in the school of thought that successful long-term investing equates to not only identifying those strong businesses but also avoiding paying too much or falling in love with them. Our process is averse to the status quo of simply buying and holding only domestic “blue chip” stocks in perpetuity, or chasing the latest technological fad. In fact, we frequently invest in securities while the herd is exiting, and conversely sell when others are enamored. While partially contrarian, our process is less about going against the grain and more about moving toward pockets of inefficiency in the capital markets, avoiding artificially placed limitations, and not being hindered by a lack of organizational nimbleness. Still, the quality of a company's earnings stream and balance sheet is important to NCA and we seek out companies with higher returns on equity and lower debt, all the while maintaining pricing discipline. The end result of our process is the amalgamation of a variety of “value” themes including deep value, contrarian, out-of- favor, under-valued relative to asset values, fallen angels, and unexciting but profitable businesses. We are open to investment “value” in its’ myriad formats. NCA’s preference for out-of-favor securities, our willingness to move around the capitalization range and to look outside the U.S. is occasionally mistaken as more inherently risky. Our belief and experience is that while any one of the various segments may exhibit heightened volatility, when combined into a well-diversified portfolio using a value discipline, the end portfolio is sound for long-term investors and, indeed, may be less risky based upon standard measurements of investment risk. Additionally, we seek to offset the volatility that can accompany the casting of a wider net by focusing only on global companies that distribute their profits generously to shareholders in the form of a dividend. Our strict dividend mentality is an often maligned screening tool but one that provides us a great deal of comfort. Dividends, by their nature, call to mind the “ bird in the hand” proverb, but based on our research it is quite applicable for investing without having to sacrifice performance. In short, regardless of where a company is headquartered or its market capitalization, the metrics are similar and consistent throughout our portfolios. We seek companies with low price-to-earnings and price-to-book ratios, coupled with high dividend yields and a strong return-on-equity. In the end, while we follow a strict process in terms of security selection and portfolio structure, we are managing our client's money and each client’s asset allocation is uniquely derived and managed based on their stated investment objective, tolerance for risk and personally communicated desires. |
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