Equity Strategies

Equity Investment Strategy

Our equity strategies are designed to provide attractive long-term returns while protecting capital in down markets. A common theme across our equity products is the identification of undervalued, high-quality companies that have consistently growing businesses, pay dividends and have strong balance sheets.

We focus on stocks with a history of paying dividends. Dividends are important from an income standpoint, but they are also an indicator of quality and business consistency. The goal is to provide an equity portfolio that offers value and produces above-average dividend yield and above-average dividend growth. We believe this will lead to competitive returns over a full market cycle and a lower-than-average risk profile.

Dividend Growth

The focus of the Dividend Growth strategy is high-quality companies with strong financial characteristics that are typically reflected in the company’s dividend history. Many portfolio holdings raise their dividends consistently over time, and the high-quality bias helps produce more consistent investment returns.

This is a long-term, value-oriented investment approach that seeks an attractive combination of above average dividend yield and above average dividend growth. In- depth, fundamental research is conducted on new and existing holdings.

This high-quality bias and propensity to pay increased dividends helps us achieve our objectives of attractive, risk-adjusted total return, income, and growth of income.

Small Cap

The Small Cap equity portfolio seeks total return in a less efficient area of the stock market while at the same time attempting to exploit a behavioral bias amongst investors. Smaller company stocks tend to have less research coverage, and we believe that long term investors can gain an information advantage and capture inefficiencies through an exhaustive, due diligence process. Further, we found that many investors seek higher returns and chase lower quality businesses when investing in smaller company stocks. This so-called “lottery effect” can provide opportunities for price sensitive investors in high-quality, dividend-paying companies that demonstrate consistency in their business.

Philosophically aligned with all Crawford strategies, we research higher quality, smaller capitalization, dividend-paying companies that offer growth potential and that we believe are undervalued. Companies that pay dividends and have a market capitalization below five billion dollars are eligible for purchase, and we typically own 60-70 stocks in this strategy.

Core Equity

The Core Equity strategy is a “best ideas” total investment return portfolio of dividend-paying companies. We use a bottom up, fundamental investment approach focused on high-quality stocks. Portfolio holdings are primarily based on individual research analyst conviction levels (“best ideas”). The result is a portfolio of consistent businesses from across the capitalization spectrum that have a catalyst for future price appreciation. The strategy typically holds 50 individual stocks which are diversified by economic sector.

Dividend Yield

The Dividend Yield portfolio is a higher quality equity strategy with an added emphasis on current income. The approach is long term, total investment return oriented, and seeks to provide a high and growing stream of dividend income.

A thorough, bottom up investment research process and adequate diversification are priorities. The stock selection criteria are focused on total return, expected contribution to portfolio yield, and quality. In this portfolio, quality implies both safety of the dividend and predictability around total investment return potential, among others. The number of individual stock holdings ranges from 40-50, and we seek to position the portfolio at the intersection of higher quality and higher yielding stocks.

SMID Cap

The SMID Cap equity portfolio seeks total return by investing in higher quality small and medium sized companies.  The lower portion of the capitalization spectrum is less efficient and often a higher growth area of the stock market.  This component of the stock market also offers investors the opportunity to benefit from owning higher quality, dividend paying companies.  Some of the companies are more mature, while others are at an earlier stage of their life cycle, but all have placed some priority on returning capital to shareholders.  As is the case with all Crawford strategies, the dividend is utilized as the initial indicator of quality.  The combination of higher predictability, higher potential growth, and less efficiency due to fewer research analysts covering this space can lead to multiple return advantages over a full market cycle.  A team-based, value-oriented approach focused on in-depth, fundamental research and analysis is utilized.

The SMID portfolio is well-diversified, invested with a longer-term orientation (3-5 years) and owns approximately 60 stocks weighted by conviction levels and risk versus return considerations.  The portfolio seeks to be at the intersection of high quality and attractive valuation, along with an identifiable investment thesis that is expected to lead to excess shareholder returns.  Companies that pay dividends and have a market capitalization between $700 million and $40 billion are eligible for purchase.

 

Managed Income

The Managed Income portfolio’s primary objective is current yield. This is achieved by owning common and preferred stocks, Real Estate Investment Trusts (REITs), and business development companies, among other securities (including fixed-income investments). All securities are publicly traded and there are no K-1s. Investment decisions are based on fundamental research. The portfolio is constructed with 30-40 individual investments and 30-35% average annual turnover.