At Two Point Capital Management, we offer our clients three investment strategies, depending on each investor’s objectives and risk tolerance. This is one of the primary ways we align your goals and risk tolerance with our work, to be sure that we’re doing the best job we can do for you and that you’re sleeping at night.
We can assist you in determining which of the following strategies is most appropriate for you. Contact us.
Strategy 1 : All Equity
This is our cornerstone strategy. Like all of our strategies, it is based on optimizing the value/quality relationship for each investment and the entire portfolio. Read more about the Two Point Investment Approach. All Equity portfolios are comprised of 15 to 35 stocks and frictional cash (which is defined below).
We manage each portfolio to maintain a balance among stocks of different size, industry and quality levels. The purchase and sale of investments is executed aggressively and may generate significant trading activity, which can occur in intense bursts as dictated by changing market conditions and portfolio composition.
The objective of this strategy is to outperform the broad stock market as measured by a full market cycle of the Russell 3000 Index.
Annual turnover of stocks within a portfolio has ranged between 25 and 75 percent, but it could be higher depending on opportunities presented by changing market conditions.
Strategy 2 : Equity + Fixed Income
Balanced Account portfolios contain equities and bonds. The equity portion is managed under our All Equity strategy (see above). To reduce the portfolio’s stock market risk, the balance of the portfolio is comprised of high-quality, fixed-income securities that are often held to maturity.
We determine the proportion of equities (stocks) to fixed-income securities (generally bonds) to align with your individual goals.
The objective of this strategy is to maximize your returns in the equity market while providing an appropriate measure of safety and comfort through fixed-income investments.
Strategy 3 : Concentrated Aggressive Equity
The Concentrated Aggressive Equity strategy is also based on the Two Point analysis of value and quality. Portfolios managed under this strategy are both more concentrated—with fewer, larger stock positions—and more aggressive; lower quality companies are considered if the value/quality relationship appears particularly attractive. Cash positions are frictional (which is defined below).
By limiting investments to a small number of large positions, this strategy contains substantial security-specific risk, and the possible inclusion of lower quality investments may add to this risk. Strong or weak performance by a single investment will have a considerable impact on investment returns.
The objective of this strategy is to significantly outperform the broad stock market as measured by a full market cycle of the Russell 3000 Index.
Frictional Cash under the Two Point Approach
As a result of the simultaneous focus on valuation, quality and portfolio composition, cash positions are “frictional.” Money market holdings are not targeted to be a certain percentage of assets managed, but are the result of a management process focused on the more important aspects of the portfolio. As a result, money market holdings, like equity holdings, may change rapidly and with significant swings.
Contact us. We can help you determine which of the Two Point Investment Strategies is most suitable for your situation, given your long-term goals, your time horizon, and your overall risk tolerance.