Investment Philosophy

IMVA’s portfolio managers are long-term investors. Their investment goal is to produce attractive long-term returns for clients within the context of a particular portfolio’s strategy and risk tolerance parameters. Fundamentally, IMVA wants to invest in quality companies, at attractive prices, for long-term ownership.

Within the context of a given portfolio or investment strategy, the portfolio managers believe “quality” is determined by a company’s balance sheet strength, net income and cash flow potential, management strength, and the “barriers to entry” associated with the business. After considering these attributes, IMVA seeks only those opportunities where price provides an attractive opportunity to generate above-average returns on the investment capital employed.

IMVA maintains several distinct investment styles. Each portfolio’s management team has, for its style, different investment and risk tolerance parameters. These investment styles may include small and/or large capitalization securities and growth and/or value holdings. In each case, the portfolio managers are looking for attractive risk-to-reward opportunities in companies whose quality and strength are undervalued by the market at the time of investment.

Business Analysis

IMVA uses quantitative screening to reduce the large universe of companies to a more manageable list of opportunities, but the firm’s primary due diligence effort consists of fundamental analysis of individual businesses. Simply put, the portfolio managers want to understand the company and the risks involved with owning the business. The process involves a thorough analysis of the key drivers of business operations, business strategy, management’s integrity and vision, financial strength and stability, and, most importantly, an estimate of the trend of future net income and cash flows. The intent of this initial process is to pass judgment on the strength of the basic business and its potential.

Stock Price Analysis

If the business analysis described indicates that a company’s business and strategy are compelling, IMVA portfolio managers endeavor to determine an attractive entry price. After analyzing current and potential growth trends in earnings, dividends, book value, sales, and cash flow, the managers compare these metrics to the historic ranges to determine the assumptions and risk currently reflected in the pricing of a stock. While not a perfect science, this strategy seeks first to eliminate as much of the price risk as possible in order to increase the probability of capturing attractive capital gains.

Fundamental Analysis and Process

The IMVA research process is designed to evaluate the intrinsic business value and price risks of a stock in an attempt to create a “margin of safety” at purchase. This process is specifically geared toward finding opportunities where the common stock of quality companies has been mispriced, due to excessive fear in the marketplace, temporary business disruptions, or other transitory factors. Extensive study, evaluation, and a clear understanding of a company and its stock can give portfolio managers the confidence to place investments at opportune times (frequently when many other investors may be selling). Prior to investing, the portfolio managers generally will have developed expectations of future business achievements on which rest specific targets or “hurdles.” These events or developments can be used to track a company’s progress and assist the managers in determining whether the investment should be held or sold. When investments work well, portfolio managers use valuation-driven price targets in order to maintain an appropriate risk-to-reward ratio in the security.

Portfolio Construction

The first step in selecting an IMVA portfolio depends upon understanding client needs, risk tolerance, and investment objectives. IMVA’s mission is to meet and exceed client expectations by providing excellent service and delivering attractive investment returns over a long-term investment horizon.

Flexibility in satisfying special or unique client needs is an integral part of IMVA’s daily attitude and overall business approach.

Risk Management

All investments have the potential for short and long-term volatility and/or loss. Though risk levels and investment parameters vary by strategy within IMVA, each investment style is subject to ongoing due diligence, with the goal of balancing risks and rewards. Specifically, managers try to identify and maintain a margin of safety between the stock price and the company’s long-term intrinsic value. As stock prices advance, IMVA portfolio managers continuously evaluate return potential versus downside risk. Generally, when target prices are met or exceeded, or positions grow excessive in the manager’s judgment or vis-à-vis a given strategy’s parameters, managers may trim or liquidate positions. Liquidations of unsuccessful positions are an unpleasant but necessary step at times as well. When significant price declines occur, managers will attempt to assess the price action in the context of the company’s long-term fundamentals and determine a course of action; these may include adding to a position, scaling back a position, or liquidating a position and re-deploying the capital elsewhere.

Fixed Income/Balanced Portfolios

Bonds can be an important element in risk management and portfolio construction for some investors. As IMVA’s portfolio managers work with clients to determine the suitability of a specific investment policy, it may become apparent that a Balanced (fixed income/equity) investment approach is appropriate. IMVA generally focuses on investment grade bond issues with short and intermediate-term maturities. Bond maturities are structured to meet specific client income needs and to provide liquidity for withdrawals.