Fintegrity’s investing philosophy is grounded in behavioral finance, understanding that emotion and psychology play a role when investors make decisions, sometimes causing them to behave in unpredictable or irrational ways that create opportunities and deviations from fundamental values. This is in contrast to Modern Portfolio Theory, which states that all securities are appropriately priced at any given time, leaving no opportunity to buy a security at a bargain price.
In general, we invest in businesses that produce strong cash flows and are positioned for success, considering quantitative and qualitative factors. We favor securities with the following attributes:
• Strong competitive position, as may be reflected by a dominant market share and/or sustained high profit margins.
• Consistently favorable returns on invested capital.
• Stocks with reasonable price to cash flow multiples.
• Shareholder-friendly governance.
• Sustainably high and growing dividends for investors desiring dividend income.
• Investment grade bonds for ballast, as needed, in portfolios.
For investors who are more comfortable with funds, we find ones that take a similar approach. There is an expansive selection of low cost commingled funds (ETFs, mutual funds, and other vehicles), ranging from passive index to actively managed from which to build effective portfolios.
By managing separate accounts, we build portfolios for each client’s unique needs and preferences, such as varying asset allocation, industry, company exposures as well as taxable income. This also includes incorporating legacy holdings that may have unrealized taxable gains into a portfolio. Separate accounts differ from mutual funds or other commingled accounts where every investor receives the same investment approach, investments, and tax treatment.
In summary, we look to invest in strong businesses at reasonable prices. We seek firms that can grow their free cash flow over time, driving up valuations for investors during extended periods.