Mr. Gunderson: Lowry Hill is a private asset management firm, providing investment management and financial advisory services for high-net-worth individuals and families. We require a minimum of 10 million in investable assets for new clients. We have been in business for over 23 years and now manage over 4.5 billion of assets for nearly 300 clients. Our offices are located in Minneapolis, Chicago, Naples, Fla., and Scottsdale, Ariz.
I play a number of roles at Lowry Hill. I am Co-Manager of our Growth Equity Strategy, one of five equity strategies at Lowry Hill. The firm also manages individual bond portfolios and alternative investments. As Co-Manager of the Growth Equity Strategy, I am involved in the actual stock selection and overall management of the portfolio. In addition, I work on the asset allocation team, which devises tools to help assess the attractiveness of different asset classes at any given time. I also play a major role in managing our new equity mutual fund, the Clear Riversm Fund. Finally, I have direct client contact with and am the portfolio manager for several client families.
TWST: Tell us more about the growth investment approach at Lowry Hill.
Mr. Gunderson: In our Growth Equity Strategy, we own a focused portfolio of approximately 25 companies. Our goal is to buy a diversified portfolio of high-quality companies at reasonable prices that will provide above-average after-tax returns over a longer time frame. This is a good match with our taxable client base. Ware really looking at investing and owning these companies over the longer run.
Our process starts with business fundamentals because they are what drive a company over the longer term. We look for a sustainable competitive advantage and industry leadership. Ideally, the industry is attractive, with good unit and revenue growth opportunities. We like to see high or improving returns on invested capital, and a management focused on maximizing long-term shareholder value. We avoid companies with management teams that are just looking to build a bigger company. We favor companies with significant free cash flow and operate with management that is able to clearly articulate a growth strategy that can leverage its sustainable competitive advantage. We limit the strategy to companies with a market capitalization of at least 5 billion.
After our work on the business fundamentals, we are able to narrow the list to 50 to 75 companies that we consider to be potential candidates. From there we focus on valuation. In other words, can we make enough money investing in the stock at today's prices given the risks we envision? Finally, we like to identify a catalyst - an event that will help to move the stock in a positive direction over the next six to 12 months.
Our sell discipline is as important as the stock selection process. We monitor a few critical variables that are tied to our investment thesis, and we look to sell the stocks if those variables are moving the wrong way. Importantly, if a stock approaches our price target, we will cut back the position and put the proceeds into a better risk/reward opportunity. The final reason a stock may be sold is to manage the portfolio risk level within established parameters. We have limits on the size of any one individual position, as well as limits on sector or industry weightings.
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