INSTITUTIONAL INVESTMENT STRATEGIES

A CLIENT CENTRIC FOCUS

Our mission is to deliver advantaged investment results over a full market cycle for clients. Our strategies, culture and business organization fully support that mission.

– Michael Anderson,
Chief Investment Officer

Chart_Analysis-Risk-Insight

“Everybody’s got a different circle of competence.  The important thing is not how big the circle is. The important thing is staying inside the circle.”

–Warren Buffet

Intrinsic Value Equity Strategy

OBJECTIVES

Compounding Returns by possessing proper temperament – a set of behaviors offsetting natural emotions – which includes;

Long Term Thinking
Expecting Price Volatility
Rational Thought Processes and Decision Making

Independent thinking with orientation towards contrarian analysis

TIME HORIZON

Best for investors with greater than 5 years investment horizon

PRIMARY RISK

Permanent capital loss

RETURN EXPECTATIONS

Inflation + 3-5% and exceeding Russell 1000 Value over full market cycle which generally runs 5-10 years

ALPHA GENERATION FROM

Good asset selection at good prices
Good portfolio positioning between defensive and aggressive
Skill – the ability to make quality long term decisions with a repeatable and intellectual process

HOLDINGS

Core at 20 – 30 holdings

BENCHMARK

Russell 1000 Value

High Conviction Equity Strategy

OBJECTIVES

Compounding Returns by possessing proper temperament – a set of behaviors offsetting natural emotions – which includes;

Long Term Thinking
Expecting Price Volatility
Rational Thought Processes and Decision Making

Independent thinking with orientation towards contrarian analysis

TIME HORIZON

Best for investors with greater than 5 years investment horizon

PRIMARY RISK

Permanent capital loss

RETURN EXPECTATIONS

Inflation + 3-5% and exceeding Russell 1000 Value over full market cycle which generally runs 5-10 years

ALPHA GENERATION FROM

Good asset selection at good prices
Good portfolio positioning between defensive and aggressive
Skill – the ability to make quality long term decisions with a repeatable and intellectual process

HOLDINGS

Core at 10–15 core holdings

BENCHMARK

Russell 1000 Value

Investment Philosophy: Intrinsic Value

A PROVEN APPROACH

  • Market prices – as caused by the collective emotions of the crowd (such as fear and greed) – create inefficiencies leading to attractive opportunities for the long-term investor
  • Prices periodically fluctuate above and below their long-term intrinsic valuation (the net present value of discounted cashflow) which occasionally creates advantaged buying and selling opportunities
  • Proprietary analysis uncovers opportunities to capitalize
    Risk management involves a “margin of safety”, stress testing, and avoiding poorly-performing businesses and industries
  • Discipline, patience and confidence in long-term expectations offers a higher probability of a successful outcome (i.e., alpha generation)
Approach_chart

“The essence of investment management is the management of risks, not the management of returns.”

–Ben Graham

STEP

1

Industry
Analysis

INDUSTRY ECONOMICS

•  Long-term expectations
•  Competitive position
•  Barriers to entry, substitution
•  Degree of rivalry/intensity within industry:
•  Power of buyers/sellers
•  Economic benefits accrue to owners

STEP

2

Security
Analysis

BUSINESS, PEOPLE AND PRICE

• Competitive advantages and their sustainability
• Competitive advantages and their sustainability
• Owners earnings
• Returns on capital
• Capital structure and leverage profile
• Managment team:
   ⁃ Operational skill
   ⁃ Capital allocation
• Assessing all securities of company:
   ⁃ Equity
   ⁃ Debt

STEP

3

Risk
Analysis

MARGIN OF SAFETY RISKS

• Margin of Safety
• Industry Risks:
• Company-Specific Risks:
   ⁃ Leverage risks
   ⁃ Business decay risk
   ⁃ Capital allocation risk
   ⁃ Volume risk
   ⁃ Stress testing

STEP

4

Insight

IDENTIFY GREATNESS

• Great business
• Great management team
• Available at great price

Alternative:
• “OUCH” Stocks
   ⁃ Overlooked
   ⁃ Underfollowed
   ⁃ Cheap
   ⁃ Hated

“We have two classes of forecasters: Those who don’t know – and those who don’t know they don’t know.”

–John Kenneth Galbraith

Translating HLCM’s Research Insights Into Alpha

1

Research
Prioritization

“Insight List” 400 Companies
“GREAT BUSINESESS”
FOR THE LONG-TERM
•  Generate superior compound returns over full market cycles
•  Sustainable results
•  Watching patiently for price while evaluating change in industry or business=
“OUCH” STOCKS: MEDIUM TERM
•  Overlooked
•  Underfollowed
•  Cheap
•  Hated

2

Fundamental
Research

100stock In-Depth
INDEPENDENT RESEARCH CONCLUSION
  • Intrinsic value analysis
  • Management analysis
  • Market cycle horizon
  • Margin of safety
  • Time arbitrage

3

Portfolio
Construction

-25 stocks
DIFFERENTIATED INSIGHTS

• Opportunity cost assessment
• Active sector weight positions
   ⁃ Best ideas
   ⁃ Low probability of risk (permanent loss of capital)
   ⁃ Grow per share basis over a full market cycle
   ⁃ Industry diversification
• Self discipline

“It’s not supposed to be easy. Anyone who finds it easy is stupid.”

–Charlie Munger

Income Strategies and Balanced Portfolios

INCOME INVESTING
  • Income Advantaged Strategy: Objective returns at least 1.5% above U.S. Treasury bonds
  • Inflation Protected Strategy: Objective is returns exceeding inflation
BALANCED
  • Customized blends of stocks, bonds
  • Diversification benefits derived from our research on asset classes with low correlation to one another

Analysis + Insight + Managed Risk = Long Term Success

CLIENT OBJECTIVES
  • High active share vs. benchmark index
  • Disciplined research process
  • Repeatability of decision-making
  • Transparency
HLCM_client_experience
HLCM APPROACH
  • Proprietary analysis
  • Leverage PM’s insight and experience
  • Managed risk via “margin of safety” approach
  • Focus on outcomes
  • Team structured for accountability
CLIENT OBJECTIVES
  • High active share vs. benchmark index
  • Disciplined research process
  • Repeatability of decision-making
  • Transparency
HLCM_client_experience_mobile
HLCM APPROACH
  • Proprietary analysis
  • Leverage PM’s insight and experience
  • Managed risk via “margin of safety” approach
  • Focus on outcomes
  • Team structured for accountability

Lets start a conversation.

We’d be happy to schedule a free consultation with you to discuss your portfolio objectives.

Hi-Line_logo_horizontal_white

25 1st Ave NW
Watertown
South Dakota, 57201
(605) 878-0897
 info@hi-linecapital.com


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