Mr. Smith: Haverford was founded in 1979 and currently has approximately 5 billion of assets under management, 70% of which is private client money and the other 30% is institutional money. Our flagship offering is the Haverford Quality Growth strategy, a large cap growth strategy with a strong emphasis on quality and risk control. In addition, we manage both taxable and non-taxable quality fixed income strategies. We also use a global allocation strategy, which augments the Haverford Quality Growth strategy by using ETFs to help clients achieve better diversification. Lastly, we have recently rolled out the Haverford Quality Dividend Value strategy, a large cap value strategy that focuses on delivering an above-average dividend yield while maintaining an emphasis on quality risk control and protection. For the Haverford Quality Growth strategy, we focus on large cap companies (5 billion market value or greater) that are established and have a track record that allows us to judge how they've done in different economic cycles. We focus on companies that have A-rated balance sheets that are financially strong. We focus on companies that can provide consistent and predictable earnings per share growth and pay a dividend, but we place much greater emphasis on dividend growth based on earnings growth.
TWST: How has the large cap quality growth strategy fared over the last year
with the economic downturn and the stock market declines?
Mr. Pride: Let's put some more numbers to that. In 2008, while the S&P was down
37%, our Haverford Quality Growth portfolio, which as Hank mentioned was fully
invested, was down approximately 26%, approximately 11% better than the market.
As Hank said, we outperformed considerably due to the overweighting in more
defensive-oriented sectors. In 2008, consumer staples as a sector was down 16%
and health care as a sector was down 23.5%, both significantly ahead of the S&P
500. Additionally, while being overweight in those areas, we were also
underweight more cyclical areas, such as materials (down 46% in 2008) and
financials (down 55% in 2008).
As Hank said, every sector showed a quality benefit. We believe that the market
yet again became refocused on earnings growth and sustainability of profits,
sustainability of profits being key because obviously companies are valued on
the basis of how much money they can return to the shareholder, how much money
they can reinvest in their own business, and how much money they make. If that
number is stable, inherently the value of that underlying business is going to
be more stable and the value reflected in the marketplace is going to be more
stable. When you have a dramatic situation like what occurred in 2008 and what
has continued in 2009, companies that are capable of showing continued stability
in their underlying ability to generate profits are outperforming considerably.
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