The FSFP Approach to Stock Selection

At Five Seasons, we believe that individual stocks and bonds can play a useful role in a well-diversified portfolio.  In the process of developing an Investment Policy Statement with our Asset Management clients, we determine together whether a group of individual stocks should be a component of their portfolios.  If it is, Five Seasons will generate the initial selection of stocks and will actively manage them.

At Five Seasons, we take a disciplined and consistent approach to individual stock selection.  We believe that certain quantitative characteristics of stocks can be indicative of their future price performance over the long term.  Consequently, we have developed a screening process, based on these attributes, that we stick to slavishly regardless of market environment.  Likewise, the price targets that we set for each stock are determined and applied mechanically.  We believe that taking the human element out of the buy/sell decision improves portfolio performance.

Several other benefits derive from our automated approach to stock selection.  First, computerized stock screening provides a cost-efficient way to evaluate a very wide array of candidate stocks.  Basically, our screens consider any equities traded on American exchanges, ranging from the smallest to the largest companies, and including Real Estate Investment Trusts (REITS) and American Depositary Receipts (ADRs).  We believe this "go anywhere" philosophy is an improvement over portfolios that are locked into specific style boxes.

Second, a consistent, disciplined, "go anywhere" method for picking stocks ensures that Five Seasons will avoid "closet indexing".  Closet indexing occurs when managers design their portfolios to mirror a stock index in terms of industry representation.  Since we believe that industry performance is a major determinant of the price performance of individual stocks within that industry, it follows that superior portfolios should be focused on industries with superior fundamentals.  Again, this philosophy requires us to be somewhat contrarian in our approach.

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If you have any questions about our approach to stock selection, please click on the "Contact Us" button in the menu on the upper left-hand corner of this site.