The portfolio manager takes input from the research analyst and investment review to construct the portfolio. He looks for input and constructive criticism from his analysts and the Investment Committee, and weighs that input before making a final decision.
The analysts and the portfolio manager discuss on a daily basis any significant changes to the companies they’re following. Every week, the portfolio manager hosts a formal meeting where the analysts talk about their companies. Before discussing companies outside the portfolio, the analysts first review the ones inside the portfolio. They must justify why these companies continue to deserve staying in the portfolio. The analysts debate some of their colleagues’ insights. It’s a meeting with a free flow of ideas, with the portfolio manager serving as chairman and mentor.
There are three reasons the portfolio manager will remove a stock from the portfolio:
- The stock reached its fair value
- Quality has deteriorated
- The catalyst for the investment thesis has been impaired
Within the portfolio, the portfolio manager manages the positions using a model weighting system that takes into consideration input from the analysts and the portfolio manager’s own judgment of each stock’s best overall value in the portfolio. Weightings will shift in accordance with market volatility, in which case rebalancing could occur periodically. Occasional changes to investment grade ratings for individual stocks (upgrade or downgrade) may result in adjustments to individual weightings.
Our weightings are different than the benchmark weightings. If we purchase and hold a stock, it’s because we like it and we’ll typically hold more of it than the benchmark.