A Conversation with EP Wealth Advisors Director of Portfolio Strategy - Adam Phillips, CFA®, CFP®
Often quoted in major national media, Adam is a Chartered Financial Analyst (CFA®), a CERTIFIED FINANCIAL PLANNER™ (CFP®), and has been included on the Forbes Next Gen Best-in-State Wealth Advisors 2019 list. He is a member of the CFA Society of Los Angeles and the CFA Institute. Adam helps establish asset allocation strategy as a member of the EP Wealth Investment Committee, which supports all EP Wealth Advisors and their clients. The Committee’s top-down approach to portfolio construction begins with an outlook on the economy’s likely direction, followed by the implications for different economic sectors and asset classes. This culminates in strategic selection of the individual stocks, bonds, mutual funds or other investments deemed most appropriate for each individual client’s portfolio.
We Look at Several Key Criteria When Buying Stocks
EP Wealth Advisors’ process of selecting equities for client portfolios demonstrates which factors to consider when buying a stock. For them, it starts at the investment-team level. Each team member is assigned various areas of coverage—for example, consumer discretionary, real estate companies or financial companies. As we evaluate companies as potential stock purchases, we consider a number of factors including:
What is the Valuation?
EP Wealth performs its own independent valuation of a stock to check if valuations are too lofty. The price of a security may differ from the intrinsic value of that security.
Is the Earnings Trend Positive?
It’s also key to comprehensively asses earnings capabilities--that the stock of the company being considered is making money and those earnings are growing to justify the company’s valuation.
Is There a Long-Term Catalyst?
Finally, we check for a catalyst that can support a company's long-term growth. When considering a company looking to expand its offerings, check to see if it is doing so successfully because a company successfully expanding its offerings could serve as a long-term catalyst for growth.
Our Top-Down Investment Approach
We evaluate the outlook for underlying industries within a sector. For example, not all financial companies are considered equal (you can use any sector as an example): in adding exposure to the sector, we must determine whether we want to focus on a major bank, regional bank or an insurance company.
Tools to Empower Stock Pickers
EP Wealth subscribes to a variety of information sources, including a quantitative research provider. Advisors can screen for factors such as earnings momentum, management quality, price momentum and valuations. Stocks are ranked with a letter grade: A, B, C, D, or F. This can narrow down the qualifying firms. Then we can drill down further into qualitative business characteristics, such as the presence of a catalyst, to select securities we’d like to add to our client portfolios.
How Can You Benefit from a Strategic Approach to Investing?
With a staff of professionals and access to analytical tools, EP Wealth offers a comprehensive range of services to help you invest with greater insight, as well as develop a holistic wealth management strategy. To discuss your finances and investment goals, we invite you to contact one of our advisors.
This is #8 in the Informed Investor “How to Build Your Investment Portfolio” series. Other topics include Asset Allocation, Why We Diversify, How to Buy a Bond, The Types of Investment Risk, Concentrated Positions, etc. For more information on our investment process, check out our investment management page or ask for a Portfolio Review.
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