However, not all equities are created equal. A lower risk-profile “aggressively defensive” stock can deliver better risk-adjusted returns and allow the portfolio to hold a greater percentage in the equity class. In a balanced portfolio, reducing bonds and increasing the share allocated to stocks improves the expected return of the entire portfolio.
At Robinson Value Management, we go beyond the well-worn paths of diversification and asset allocation. We carefully examine individual investments, looking at a company’s market position, credit quality, valuation multiples, consensus, insider activity, price movement and other factors to better understand the underlying business and the immediate challenges faced by the company and its investors.
While fundamental analysis is the first step in any investment journey; macro-economic and behavioral factors in today’s environment can overwhelm fundamentals-only based equity investing in the short-run. Emotions and shifts in expectations can drive large price movements that seem to depart from common sense and company fundamentals.
"The approach is not accurately described as conservative, but aggressively defensive."