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Why? Panhandle Portfolios believes annual total returns of 10% to 15% are
consistently achievable with concentrated portfolios of
high yield
investments. Total returns are a combination of income and capital gains.
Panhandle Portfolios invests in stocks, bonds and cash.
There are two cornerstones to this
objective; income earned in dividends and interest, and the
preservation of capital. The foundation of the portfolio is
income. The investments we own must pay us. The importance of
this can not be over empathized.
Significant income from our investment means there is an
acknowledgement of the managers of the companies we invest in of
our right to receive part of the cash flow from the business.
Not 1% or 2%, mind you, but a minimum of 7% and typically much
more. I have written about this in the commentary section in an
article entitled A
Word I Never Heard.
The preservation of capital is important. The income we receive
increases our capital and helps in protecting our investments.
Panhandle Portfolios will also hold cash in periods that
threaten our capital.
Cash is what you deposit into and take out of your investment
account, and cash is the investment of maximum safety. Cash in
Panhandle Portfolios is a tactical investment (short-term)
position and can range from 0% to 50%. Cash earns very little,
so it is not an acceptable long term holding, but will be used
to preserve capital in the presence of significant market
contractions.
Every investment philosophy has limitations. Panhandle
Portfolios’ emphasis on income has limitations.
Profits are the source of all growth. Panhandle insists some of
the profits be paid to us. To the extent we take profits, we
limit the growth potential of the businesses we own. This is an
acceptable tradeoff, but it tends to concentrate our investments
in more stable industries that do not normally experience rapid
growth.
How? Panhandle
Portfolios identifies potential
high yield investments through
the use of investment screens. We use screening products
available to all individual investors at a reasonable cost.
These screens reduce thousands of stocks and bonds down to our
universe of about 1000.
We build portfolios from investments in this universe. Extensive
research is done on each potential investment and a
Full Report
is written and published. This includes fundamental factors,
such as the company’s competitive position within its industry,
and valuation factors such as its price relative to its book
value, earnings, and sales.
Panhandle Portfolios builds concentrated portfolios of
approximately ten holdings. The portfolio may have more or fewer
depending on circumstances and the markets. Diversification is
an important element and the safety and power of diversification
is captured with as few as seven investments. We use ten. Please
read the portfolio section for a complete description of our
portfolio structure
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