Investment Approach and Strategies

business analysis graphicInvestment Approach

McLaughlin Asset Management’s success in investing is achieved through a disciplined, long-term investment approach. All portfolios are managed to match specific client needs and goals. No one client is the same; therefore, our main priority is to work closely with each client to understand investment objectives and develop appropriate investment policy.

Our goal is to provide superior service and superior investment performance, while protecting our client’s assets.

Cost Effective

We feel it is critical for a fiduciary to employ a cost effective investment approach to help clients achieve financial success. Our firm is fee-based and emphasizes individual stocks and bonds to help reduce the overall net investment expense. If you are paying a management fee AND the majority of your investments are in mutual funds, you may be paying well over 2% in fees and expenses. In addition, mutual funds often have high turnover, leading to a potential income tax burden year after year.

Control and Efficiencies

Continuous supervisory strategies emphasizing individual stocks and bonds may provide added control over income tax liability and help to avoid concentrations and overlap. 

Investment Strategy

McLaughlin Asset Management employs a top-down and bottom-up approach in developing investment strategies based on a combination of thematic, fundamental, qualitative and quantitative variables for portfolio management.  The goal of this proactive strategy – successfully manage downside risk resulting in less volatility, better income and improved long-term performance.


The first variable to consider, and probably the most important and overlooked, is an outlook of the current and expected economic market conditions. Secondly, after gathering current and expected market conditions, McLaughlin Asset Management creates a fixed income and equity market assessment for the next twelve to eighteen months. Asset allocation targets are established, which are vital to meeting long-term investment objectives.

All steps are modified under each clients’ investment policy to coordinate with the overall outlook for the fixed income and equity markets. Individual strategies are established for each asset class, and issues are selected within that asset class of the portfolio. All of these aspects are closely monitored on a continuous basis.

  • Economic Outlook
  • Equity and Fixed Income targets created
  • Fixed Income Issue analysis for inclusion in portfolio
  • Passive Equity – special purpose exchange-traded-funds (ETF’s) targeted
  • Sector and Industry targets employed within the equity asset class
  • Equity Issues are identified for inclusion in portfolio


  • Equity Issues are further screened using a bottom-up analysis
  • Does the issue fit into the clients’ portfolio? Tailor investments to all objectives previously established within investment policy.

Equity Investing

Experience has shown that investing in companies, small or large, with growing earnings at reasonable valuations is a proven method for success. McLaughlin Asset Management invests for the long-term and seeks to minimize fundamental disappointments. Two of the tools we have developed internally over the years include the equity monitor list and model equity portfolio. These tools help establish sector weightings and the relative weightings of an issue within the sector.

We monitor around 150 stock issues with a target of 35 to 50 stocks within each portfolio, in order to adequately diversify the portfolio.

Criteria for stock selection includes:

    Sector/Industry Diversification

    Identify sectors and industries that appear attractive on a top-down basis, while avoiding excessive sector and industry bets. Variables for evaluation include:

    • Sensitivity to interest rates and yield curve
    • General growth environment relative to other sectors/industries
    • Factors (commodities prices, workforce, inflation, etc.) that influence cost and pricing
    Quantitative Valuation

    We evaluate stocks for inclusion on our equity monitor list that fit into our top-down sector and industry strategies. Variables for issue inclusion consist of:

    • P/E ratio should be low relative to market & industry in certain cases
    • Earnings growth/trend should be positive
    • Upside potential greater than 15% – Margin of Safety
    • Balance sheet should be sound – prefer debt/capital less than 50%
    • Dividend yield is a plus if all other factors equal
    Qualitative Valuation

    Lastly, we examine stocks using a combination of our equity monitor list and analyst research. Variables for issue addition involve:

    • Overall business model must make sense
    • Competitive advantage within industry
    • Relative attractiveness to other companies within industry is considered
    • General quality must be good
    • Management team must be sound—especially integrity
    • Analyst ratings positive (up to three different analysts)
    • Downside risk considered
    Sell Discipline

    Reason to sell or trim a position include:

    • Appreciation in price
    • Anticipation of economic or industry weakness
    • Emergence of a more attractive investment
    • Deterioration in a company’s fundamentals
    • Emphasis on price targets which reflect the analyst’s outlook for the company and the market

    Passive Equity Strategy

    McLaughlin Asset Management employs a passive equity strategy for a portion of the equity portfolio. This strategy, actively managing passive investments, provides diversification and access to specific areas of the equity market; particularly, by geographic area and within industries we feel certain individual issues may pose excessive volatility. This is achieved by utilizing exchange-traded-funds (ETF’s).

    In certain circumstances, ETF’s help fill-out positions in a specific sector such as energy or financials. The international position is reviewed for geographical areas with stable political systems and good economic growth prospects. The U.S. equity area provides for different styles from large cap to small cap to growth versus value. The investments are formulated to provide long-term returns greater than the S&P 500 and enhance the diversification of the portfolio.

    Fixed Income Investing

    McLaughlin Asset Management, Inc. uses a market-sensitive active approach to the management of fixed income securities. The duration or maturity of the bond position of the portfolio is reviewed frequently. We consider the type of bonds to hold with regard to coupon, call provisions and premium or discount bonds. U.S. Treasury, Government Agency and Corporate Bonds are used depending on which security is most attractive at that time.

    We favor individual bond issues rather than bond mutual funds due to customization and asset control, control of tax liability, and lower investor expense. Also, in a rising interest rate environment individual issues provide greater protection against loss of market value.

    The Fixed Income Strategies Employed include anticipating cyclical movements in interest rates. If a decline in interest rates is anticipated, the average maturity of the bond portfolio will be increased. Portfolio changes are within established guidelines to assure that both required income levels are maintained and your risk parameters are effectively controlled.

    Taking advantage of temporary market disequilibrium, such as

    • Differences in yield between similar securities
    • Relationship in spread between market segments