Investment Philosophy


Ledyard Financial Advisors is a globally focused asset management firm providing individual investors with a broad set of global investment opportunities and asset management strategies. Ledyard Financial Advisors is noted for excellence in constructing globally diversified portfolios and identifying effective investment solutions that address the distinct requirements of our clients.

At Ledyard Financial Advisors, we believe that superior investment returns are most effectively realized through proper asset allocation and risk control. We believe many different types of asset classes and geographical markets offer attractive return potential over time. Identifying these opportunities and assessing attendant risks is the primary thrust of our work. We believe that active asset allocation best positions portfolios to capture these returns while controlling the risk of capital loss. Working within the context of a client’s particular investment needs, we design portfolios that strike that client’s appropriate balance of investment return and risk.

Process:

  1. Asset Class Selection: In a continuous process, we evaluate investment return and risk prospects for the world equity and fixed income markets, commodities, gold and other asset classes. We focus on economic growth, inflation, interest rates, valuation, market price trends and both fiscal and monetary policy in all global markets where we may invest. Gathering information and perspective from internal and external sources, we exercise judgment on which asset classes to invest in and which ones to avoid.
  2. Equities: The desired equity commitment for a client is determined by that client’s investment objectives and our assessment of the returns and risks existing in the US and foreign stock markets. We buy individual stocks when investing in the US market and in certain international markets. When investing internationally, we primarily buy ETFs, country funds, and actively managed funds.
  3. Sector Emphasis: When investing in US equities we evaluate growth, valuation, and market price trends of the various stock market sectors to determine where to place investment emphasis and what to avoid. Sector decisions are heavily influenced by their relative attractiveness on various stages of the economic cycle.
  4. Stock selection: Individual stock selection is driven by our perception of where the best combinations of potential return and risk exist. We seek companies with relatively attractive growth, profitability, valuation, cash flow and price trend characteristics. We are rigorous and demanding in our stock selections and seek opportunities for long-term ownership. We believe dividends are an important source of investment returns, and typically seek a relatively high and/or fast growing dividend payment stream. To sift through the hundreds of possible stocks we could own, we use two computerized screening mechanisms to rank the universe of stocks by our most favored metrics related to growth, profitability, cash flow, valuation, and price trend. One screen is best thought of as a dynamic process that considers where we are in the business and profit cycle and then considers characteristics that would be most attractive. For example, if we are at the beginning of an economic upturn, we will screen for companies that possess the greatest operating leverage as they will demonstrate the highest earnings growth coming out of the recession. Or, if the rate of economic growth has peaked and will slow, we rank companies by earnings and cash flow stability as a guide for stock selection. Using this output, we consider such qualitative factors as competitive position and quality of management before making our individual stock selections. Supporting this activity is the output from an independent quantitative computer screen using the factors mentioned above and weighing these factors in a way that the model has demonstrated value added results. This screen ranks a broad universe of stocks by a combined score that weighs the following variables: Valuation, Capital Deployment, Earnings Quality and Trend, and Price Trend. Each variable is comprised of various subsets of variables. When looking at valuation, for example, the model considers price to earnings, price to book, and price to cash flow measures. In an interactive and dynamic process, the investment team uses the output of the independent screen to check the validity of our internal business cycle screens and as another source of buy and sell ideas.
  5. Fixed Income: Our approach to investing in fixed income securities assesses macroeconomic factors, valuation, price trend and risk. We begin with an evaluation of the returns and risks present across the full duration spectrum of U.S. Government, Corporate, High Yield, Municipal and International fixed income securities. We manage duration levels based on our assessment of inflation prospects and the risk/reward offerings along the duration spectrum. Credit risk, valuation analysis among these different fixed income sectors and tax considerations determine our commitment to these sectors of the bond market. We typically buy individual bonds but we use a managed fund when investing in the high yield sector.
  6. Other Asset Classes: We may invest in commodities, gold and real estate. Investments in these areas are a function of their relative attractiveness to equities and fixed income securities. We have invested in gold as a source of return and as a source of risk control for the total client portfolio. Investment vehicles used with these asset classes are ETFs, managed funds, closed-end funds, and, where suitable, private investments.

Each client has a dedicated portfolio manager responsible for implementing the specific investment strategy chosen for each client. Portfolio investments are monitored daily and adjusted according to strategy. Face to face meetings with the portfolio manager are offered to our clients to present investment results, explain strategy and attend to any changes in circumstances.

 

Non-deposit investment products are not insured by the FDIC, are not deposits or other obligations of, or guaranteed by the Bank or any affiliate, and are subject to investment risk including the possible loss of principal amount invested.