The Loudon Investment Management investment philosophy focuses on long-term value investing with above average current income and below average volatility. Our portfolios do not look like the overall equity “market” and often not like typical balanced portfolios either. While holdings are spread across a number of market sectors, our portfolios have a point of view which reflects our perception of where value is currently most available in the market place. We are believers in unbalanced diversification.
- The short-term orientation of most investors regularly creates periods of over and under valuation for the more rational long-term investor.
- We invest with a 3-5 year time horizon, about the length of a market cycle.
- The average holding period for our investments has historically been about five years.
Focus on yield
- Dividend income analysis is the primary basis of value assessment.
- We look only at companies with current income yields higher than the general stock market and also higher than their own 4-5 year historical average yield.
- Our holdings consist of stocks whose yields are high because the price is low and, we believe, depressed. We do not just buy a spread of stocks whose yields happen to be high.
- Fixed income securities are utilized if appropriate to client investment objectives.
Focus on value
- Fundamental quality is a high priority. It is determined by evaluating the balance sheet, cash flow, access to capital, and the security of the dividend.
- Deep fundamental analysis of each company’s finances and business strategy avoids both torpedoes and the value trap.
- Low current expectations often produce strong future investment returns.
- We believe, and research supports our belief, that equity investments with above average income yields and reasonable fundamentals will produce returns that exceed market performance but with below average volatility.