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OUR
STOCK PHILOSOPHY
Tower Asset Management's investment
philosophy emphasizes investing in the common stocks
of well established, financially strong and well managed
medium to large companies that offer above average growth
prospects at reasonable/attractive valuations and that
are leaders in their respective industries.
Tower primarily uses fundamental analysis
to select common stocks for investment. Below is a summary
of the major quantitative and qualitative fundamental
factors that are evaluated by Tower during its stock
selection process:
QUANTITATIVE
FACTORS
- Size of Company
- Financial Strength
- Revenues Cash Flows & EPS Growth Prospects
- Record of Financial Performance
- Historical Stock Price Volatility
- Predictability of Reported EPS
- Current ROI/ROE and Trend
- Current Profit Margins and Trend
- Ability to Produce Strong Cash Flows
- Momentum in Operating Trends
- Valuation Relative to Market, Peers, & History
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QUALITATIVE
FACTORS
- Length of Establishment
- Strength of Business Franchises
- Competitive Position in Industry
- Business Strategy
- Products & Services
- Research & Development
- Sales Force
- Size of Addressable Markets
- Quality of Management
- Catalysts for Positive Change
- Intangibles
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Other key selection
criteria include possessing a strong or unique business
franchise or competency, and having a history of delivering
superior financial performance that is consistent regardless
of the business cycle. Lesser but still important criteria
are factors such as accelerating growth in revenues
and earnings, strong cash flows, and a history of low
stock price volatility.
Tower implements its investment philosophy
by employing both a "top-down" sector weighting
process as well as a "bottom-up" stock selection
process. From an initial universe of some 800 company's
quantitative screens and fundamental analysis techniques
are applied to reduce the universe to about a 100 company
"Active Watch" list. Sector strategy considerations
are then overlaid versus this "Active Watch"
list in conjunction with more rigorous screening and
analysis to construct a portfolio of holdings.
Tower attempts to identify sectors
within the markets that it believes possess both
superior fundamentals and the prospects for superior
growth over the longer term. Certain sectors will be
emphasized in the portfolio construction process when
major demographic and economic trends that benefit those
sectors can be identified.
Tower manages risk by diversifying
common stock portfolios across economic sectors, industries,
and companies.
Security position sizes are also limited. Limitations
are determined based on each individual client's tolerance
for risk.
Tower takes a long-term view to investing
and portfolios generally incur relatively low turnover.
Holdings may be sold either partially or in full for
reasons that include deteriorating fundamentals, loss
of management focus, excessive valuation, or replacement
due to the emergence of a better opportunity elsewhere.
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