67 WALL STREET, New York - January 11, 2013 - The Wall Street Transcript has just published its All-Cap Growth Investing and Other Strategies Report. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: All-Cap Growth Investing - Closed-end Mutual Funds - Investing in Gold - Bottom-up Investing
Companies include: AFLAC Inc. (AFL), Interpublic Group of Companies (IPG) and many others.
In the following excerpt from the All-Cap Growth Investing and Other Strategies Report, an experienced portfolio manager discusses his investment philosophy and stock picking methodology:
TWST: Please tell us about The Capital Management Corporation.
Mr. Call: The Capital Management Corporation (CMC) is a 100% employee-owned investment advisory firm. I have served CMC's clients for the last seven years, mostly as the Chief Investment Officer. The Capital Management Corporation has a terrific long-term track record of investing money. We invest in all capitalizations for growth, growth and income and balanced accounts. We screen approximately 3,000 stocks that trade daily in the United States, based on cash flow and earnings growth metrics. We then perform fundamental research on 150 of those stocks - what we consider the top 5%. The 60 great companies that pass that fundamental research are then evaluated on valuation. This results in portfolios with roughly 30 to 40 stocks that have both great growth attributes, as well as attractive entry valuations.
TWST: When you talk about the fundamental analysis, what specifically are you looking for and evaluating?
Mr. Call: We are looking for companies that are leaders in a profitable niche that will continue to grow in the future. We want them to be protected from competition or threats from the outside. We are looking for companies that generate a lot of cash and a rising stream of earnings. We want to see them reinvest cash they are producing back into future growth opportunities, as well as make small accretive bolt-on acquisitions, retire debt as it comes due, pay dividends, raise dividends over time and repurchase stock. We are very excited when we can find a growth company that can do all of this.
TWST: You talked about some factors that drive your investment process. Would you go more in depth about how you would define your overall investment philosophy?
Mr. Call: Long-term, we believe that stock prices are highly correlated with earnings. So if you can find a company that's going to grow long term at a double-digit rate, then it should provide a very attractive long-term return. We can add to that return by buying at low valuations and receiving a rising stream of cash dividends. When combined, long-term earnings growth, cash dividends, dividend growth and valuation multiple expansion enable us to compound attractive portfolio returns.
We also like companies that are overlooked by the market. Wall Street is incentivized to promote companies that need cash and must issue new stock and bonds. Many companies with negative cash flow pay Wall Street large underwriting fees and commission from issuing these stocks and bonds. In turn, many brokerage firms place "buy" ratings on many stocks that issue new shares. We look for the opposite. We look for companies so healthy that they can fund their own growth internally and
For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.