Investment Strategy

Our Research-Driven Investment Approach:

Train, Babcock’s investment process is distinguished by intensive research and analysis, a process which involves the entire staff of professionals.

Research begins with an examination of the leading companies in their industries with a record of sustained profit growth. We look at the revenue sources to determine their sustainability; establish whether accounting policies are conservative, and examine measures of profitability and trends in the balance sheet.  Using our forecast of free cash flow generated from operations, we determine a fair value for the stock.

Our qualitative analysis looks at a company as if we and our clients will be active owners of the business. We consider the culture of the company, its management style, the quality of its products and people, and its position in the industry. We look for the human and financial resources that will enable the company to maintain its growth rate. We also check with outside sources.  We visit the company headquarters and conduct detailed discussions with senior management. If the conclusions of our qualitative and quantitative analyses are both favorable, the company becomes a candidate for Train, Babcock investment.

The Investment Committee, which includes analysts, portfolio managers and managing directors, designs a diversified Model Portfolio containing the analysts’ best ideas. The Committee meets regularly to consider additions or deletions and to set target levels of reserves. The portfolio managers then invest each client’s portfolio with reference to the Model Portfolio, the agreed strategy for the individual portfolio, and the stocks it currently holds.

Some business characteristics we

Like Avoid

Low Cost Producers
Franchises
Business to Business Cost Cutting 
Innovation
Expanding Markets

Declining Industries
High Leverage
Unseasoned
Commodity Pricing
Environmental Risk
Fashions and Fads

Portfolio Management:

Equity holdings are well diversified but there is no attempt to represent every sector or mirror any market index. The most successful equity positions are allowed to grow as a percentage of the portfolio. The least successful are replaced with more attractive growth opportunities. Stocks are sold promptly if fundamentals deteriorate or it becomes apparent that expectations will not be realized. Portfolio turnover usually averages less than 20% a year.

The goal of portfolio management is always two-fold: (1) to maximize growth in real value over time without incurring undue risk and (2) to assure that each portfolio remains properly structured to meet our client’s specific needs.

In managing the fixed income portion of balanced portfolios, we concentrate on high quality notes and bonds (taxable or tax-exempt as appropriate) to provide liquidity and diversification against stock market fluctuations.