Investment Approach for Selecting Equities
Waynes core investment philosophy stems from the belief that stock ownership equates to business ownership. In order to build and preserve wealth over the long run, one must carefully search out those businesses that possess qualities that make them truly outstanding over time.
The process Wayne uses to select stocks and build stock portfolios is as follows:
Wayne generally begins the process by reviewing RBC Dominion Securities extensive research recommendations, in particular the Guided Portfolios and Fundamental Equity Weightings. He then will overlay those recommendations with his own value-orientated selection criteria.
He screens for companies in healthy financial condition (he examines debt level, profitability, free cash flow, and returns of shareholder capital). In addition, he looks for businesses with good qualitative characteristics like an experienced and proven management team, demonstrated market leadership, and sustainable growth characteristics. Finally, he carefully searches for businesses whose shares trade at low valuation based on measures of price to earnings, price to free cash flow, price to book value, and dividend yield.
In building a portfolio, he will then follow a diversification strategy and allocate holdings according to industry sectors based largely on relative valuations as opposed to expectations of sector performance. However, he will use the full spectrum of industry sectors similar to the Guided Portfolio, dividing holdings into Interest Sensitive, Consumer, Industrial, and Resource sectors.
Investment Approach for Fixed Income Securities:
Wayne selects fixed income securities based on RBC Dominion Securities fixed income research and economic analysis. He looks at the relative values and differences in interest rates between federal, provincial, and corporate bonds. Wayne also monitors the relationships between interest rate trends and economic cycle. Most importantly, fixed income securities are then selected in order to closely match the clients income requirements, time horizon and risk tolerance.
In the same vein as with equity positions, the clients objectives and time horizon will determine the quality, yield, and duration guidelines for the fixed income portfolio. From there, he will use a laddering strategy with normally five to ten positions.