Montag & Caldwell prides itself on having a long duration, time-tested, and rigorous discipline to which we adhere in terms of evaluating equity and fixed income investment opportunities. Our allocation strategies are primarily actively managed portfolios that seek to provide capital growth and preservation of capital through a combination of both stocks and bonds. The equity portion of the portfolio is generally the driving force behind performance, while the more stable income of bonds serves to mitigate portfolio risk.
Our equity discipline focuses on companies that are able to compound earnings growth at a double digit annual rate. At the same time, we are very conscious of what we pay for those investments by seeking to acquire them at a discount to our estimate of the company’s value. This provides our Clients a “margin of safety,” and helps to ensure they are better compensated for any company specific investment risk. This approach delivers portfolios with a bias towards higher quality equity securities and, therefore, a unique return profile. Investors are taught to believe that higher risk generates higher returns, but our discipline, over time, has generated higher returns with less risk, which we attribute, in part, to this bias towards higher quality equities.
High quality stocks typically outperform over market cycles (the combination of a bull and bear market) and really stand out when uncertainty and market volatility are rising. In both rational and volatile market environments, investors tend to pay more for quality because they tend to put a premium on safety – and demand more compensation for taking on more fundamental risk. We rely on numerous measures to assess the quality and, therefore, the value of the companies in our Client portfolios. The centerpiece of our valuation discipline is a proprietary model that we developed in the 1970’s. The manner in which we perform this analysis in many ways is a replica of what a CFO might do when considering capital expenditures on new pieces of equipment or new product introductions. Similarly, we believe it is prudent to value a company’s aggregate cash flows in the same way corporate executives might invest in their own business. We also incorporate qualitative factors such as experience with management, industry trends, historical execution, etc. While there is no concrete set of standards that define a company as high quality, we have long used a very robust criteria that emphasizes factors such as balance sheet strength, earnings quality and visibility, and profitability. These attributes have tended to preserve our Clients assets better than the market in periods of negative returns, and subsequently has tended to outperform over market cycles.
Our fixed income allocations focus on risk free US Treasuries and high quality large investment grade Municipal, Agency, Asset Backed and/or Corporate bonds. The allocation is tailored to meet quality, income, and tax considerations. Sector weightings and duration targets are actively managed according to the investment team’s outlook for the economy and interest rates – determined through an analysis of the business cycle – as well as the outlook for corporate profits.
The results of our allocation strategies have been at least equal to, and often better than, many of the most sophisticated institutional portfolios. We are committed to producing superior investment results by delivering professionally managed, customized allocations utilizing proprietary, time tested investment disciplines designed to better ensure that you meet your financial goals. To learn more about how Montag & Caldwell can help you, schedule a meeting through our contact us link.
The story of the “Montag & Caldwell” brand name traces its roots back to 1945, when Louis A. Montag started one of Atlanta’s earliest independent investment advisory firms. The current brand name of “Montag & Caldwell” was adopted in 1956. Effective August 1, 2024, M&C operates as a distinct brand/business unit within Advocacy Wealth Management, LLC, an SEC-registered investment adviser, pursuant to the terms of an asset purchase agreement. While primarily known for managing equity securities, our Firm’s experience also includes fixed income and asset allocation strategies. With an emphasis on managing risk, our investment professionals are as comfortable working with a holistic, solutions-based approach for an individual as we are managing a discrete allocation for an institutional relationship.