The Homestead Approach: A Dynamic and Collaborative Process
Our approach combines the independent thinking of our individual managers, who are always on the lookout for new opportunities, with the peer-reviewed rigor of the team. By challenging the assumptions behind each idea, our professionals endeavor to strengthen — or abandon — the conviction that a portfolio candidate might be a prudent choice.
On the active equity side, we look for signs that an underperforming company, whose stock is discounted by the market, has the management strength to make the firm more profitable. In the credit markets, we make short-term tactical allocations to sectors and industries, gravitating toward sectors and specific securities that look attractive in terms of risk/reward.
With more than 100 years of collective experience, we are not overly influenced by the global market’s daily price changes. We are much more focused on analyzing the underlying fundamentals of the securities themselves to gain a sense of how they might perform over a three-to five-year time frame, when they might be worth even more.
To build a portfolio, we apply a four-step selection process:
- Idea GenerationWe routinely monitor thousands of securities through our own proprietary research capabilities as well as gather insights from outside research firms, analysts and traders.
- Fundamental AnalysisWe endeavor to identify the sectors, industries and companies likely to outperform their benchmarks over one or two market cycles.
- Portfolio ConstructionBased on our fact-finding efforts, we purchase those stocks and bonds we expect may deliver optimal risk-adjusted return in the most attractive market sectors.
- Portfolio MonitoringWith a focus on risk management as well, the team shares responsibility for daily oversight of each portfolio’s investments. When warranted, a recommendation to buy, sell or hold a security can be made.
Long-Term Thinking Takes Patience
A long-term emphasis like ours still requires subtle, opportunistic adjustments to company positions over time. It also cultivates the patience needed for us to familiarize ourselves with how many different securities perform through changing business and market cycles.