Global diversification gives IronHorse the ability to scan the world for investments that fit our value-oriented philosophy, thus improving our potential to produce outsized returns in all market environments. Meanwhile, global diversification helps diminish overall portfolio risk over time. In the end, IronHorse remains steadfastly focused on superior risk-adjusted return. Strategic, multi-level diversification gives IronHorse investors an advantage.
How We Achieve Diversification:
IronHorse invests in mid and large cap companies across all regions of the world, from North America, to the developed EAFE (Europe, Australia, Far East) countries, to emerging markets. All individual investments in international markets must meet strict valuation, liquidity, and market-cap criteria to ensure that IronHorse is providing returns without excessive risk. IronHorse imposes limits on the level of investment in any one country or region.
IronHorse complements its bottoms-up, fundamental single-stock orientation by analyzing and shaping the portfolio at the sector level. Various criteria such as valuation, growth potential, and overall market environment guide the allocation process. Similar to the process for geographic diversification, IronHorse uses strict internal guidelines that limit too much concentration in any one sector.
IronHorse purchases all investments in local currency providing IronHorse investors true currency diversification.
The current Marketplace for a globally-minded approach Investors more and more need a thorough understanding of how macroeconomic and geopolitical factors impact their investments. Unfortunately, most of the available investment product has been created with a US domestic bent and born in the extended bull markets of the last thirty years. This combination has left a gaping hole in most investors portfolios: where they are overly exposed to the US domestic markets and inadequately equipped to preserve capital in down markets.
Finding companies trading below intrinsic value is certainly a very important part of constructing a global portfolio capable of properly balancing risk and reward, but it’s not the only ingredient. Thoughtful consideration of factors such as liquidity, diversification across sectors, regions, and currencies, and the potential impact of obscure market risk factors on all portfolio companies significantly increases the odds of successfully navigating turbulent market periods.
According to Chad Cunningham, Chief Investment Officer, IronHorse conscientiously considers all of these factors when constructing the overall portfolio:
“The liquidity of the underlying portfolio is very important to us. Each name must adhere to strict market cap and volume rules. Median market cap is approximately $4 billion with median daily trading volume of nearly 1.5 million shares. Scenario and stress test analysis helps the investment team consider how various situations could impact our names at any moment. Finally, IronHorse strives to ensure that the portfolio isn’t dangerously concentrated in one particular theme, region, or sector. All tactical allocations are made with strong risk management principles in mind.”
Growth to Value
IronHorse strives to provide superior long-term risk-adjusted returns. To achieve our goals, IronHorse invests in global mid to large cap equities, primarily focusing on investments in developed regions and markets. The investment selection process is value-oriented.
Top Down/Bottom Up
It is possible to find the right balance of return opportunity and risk management. We do so by balancing a global top-down macro analytical process, with traditional value-oriented, fundamental equity research and stock-picking.
IronHorse Investment Committee Member, David Waddell says, ”Money cannot be properly managed in today’s dynamic and interconnected world without bringing the entire spectrum of analysis to bear. Macro, micro, fundamental, technical, geo-political, etc. You name it, we’re thinking about it. At IronHorse, our views are comprehensive”
Identify, Choose, and Control
A global perspective informs our selection process. A top down view and bottom up approach determines our choices. And, a value of growth philosophy is the control mechanism that moves us toward the desired objective.