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Investment PhilosophyExecutive SummaryIndividual Stock Selection ProcessThe underlying principle of BOSC’s investment philosophy is to invest in companies with strong fundamentals when they are reasonably priced. There are several key components to the screening process at the core of the investment philosophy regarding individual investments. They are:
Mutual Fund Selection ProcessBOSC may use mutual funds in client portfolios to provide proper diversification, expert management in an investment category in which it is difficult to outperform the benchmark, or to provide coverage in a sector of the market that we no not follow. Investing in targeted funds with various market capitalizations, economic sector weightings and investment styles can provide higher returns and lower portfolio risk than in individual equities.The following criteria are used in the initial screening process, ongoing fund monitoring and continued due diligence:
- Sustainable earnings growth
- Consistent revenue growth
- Measurable organic growth rather than acquisitive growth
- Consistent operating cash flow generation
- Consistent and non-cyclical margins
- The market for the company’s products and/or services is large and growing
- Non-restrictive debt structure
- Positive relative performance and valuation vs. the industry and the market
- Positive outlook for the company when considering forward-looking macroeconomic environment
- Strong and experienced management and corporate governance structure
- No front-end or deferred loads.
- Reasonable expense ratios within the respective peer category.
- Actively-managed funds should be very competitive within their respective capitalization weight and investment style category on a risk-adjusted basis, over the previous three and five year periods. Annual returns vs. the benchmark should be consistently in the top quartile or top third of peers.
Average geometric market cap weights should approximate the following:
$12 billion and above = Large Cap
$3 – $12 billion = Mid Cap
$3 billion and below = Small Cap
- Actively-managed funds should have an alpha measure greater than zero over longer investment time periods .
- Manager tenure of actively-managed funds should be greater than three years. A fund managed by a committee should have sufficient performance history and adequate tenure of head portfolio managers as well.