Gold Leaf Investment Process
To control the risk inherent in equities, Gold Leaf portfolios are invested in lower risk, U.S. companies that have 1.) entrenched competitive advantages and that are 2.) generating cash. All of our proprietary research is focused on answering two fundamental questions:
Is it a good company?
Is it a good price?
We spend a great deal of time analyzing the nature of a company’s competitive advantage, the duration of that advantage, and the threats to that advantage. Further, analysis of the use of cash within these companies is critical. We prefer companies that are about to wind down their capital expenditure programs. As internal cash needs diminish, more cash is available to shareholders through dividend increases and share repurchases.
After being satisfied that we have identified a good company, we then commence to answer the second fundamental question, “Is it a good price?” We employ a variety of historical valuation ratios: price/cash flow ratio, price/book ratio, price/earnings ratio, and higher dividend yield. Importantly, we also determine the company’s value on a discounted cash flow basis.
The fixed income investment process also stresses conservatism. The fixed income portion is managed for total return, generally invests in the shorter end of the maturity spectrum, and buys U.S. Government Agency, very high quality corporate bonds, and municipal bonds.