INVESTMENT SOLUTION: Model Investment Portfolios

Barksdale Investment & Research (BI&R) provides U. S. All-Cap Value and Large-Cap Value model stock portfolios that implement the approach to value investment that Jim Barksdale has followed successfully for 35 years. BI&R’s model portfolios are implemented and distributed by F/m Investments, a registered investment advisor with in excess of $1 billion of assets under management.


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BI&R U.S. Equity Value Model Portfolio

EXPERIENCE AND HISTORICAL RESULTS

Jim Barksdale founded Atlanta’s original-Equity Investment Corporation in 1986. There, he served as Chief Investment Officer and lead portfolio manager over all of the firm’s investment strategies, including its core U.S. All-Cap Value (ACV) and Large-Cap Value (LCV) strategies. Under his and his investment team’s management, these strategies out-performed most U.S. equity indices (including the S&P 500), with below-market risk, whether measured by volatility or frequency of incurring a 12-month loss.

As a result, the firm grew to manage $5.6 billion, with four investment professionals and 29 employees. In 2013, Barron’s featured Barksdale in a review of his approach to value investing. BI&R portfolios provide continuity of this investment decision-making and approach.


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2013 BARRON'S - Interview with Jim Barksdale

PHILOSOPHY

BI&R offers a unique approach to value investing and risk management, weighing growth and price risks. Businesses that cannot maintain long-term growth typically prove to be inferior (and often high-risk) investments, even when purchased at low prices versus earnings. However, due to rosy expectations, “Growth” companies are typically priced high versus earnings, creating price risk when future growth slows. Earning strong market returns, while managing growth and price risks, requires a clear understanding of the value of long-term growth, and an ability to assess a company’s likelihood of sustaining it.

While pursuing an MBA at Wharton Graduate School of Finance, Jim Barksdale researched conventional approaches to business valuation. Warren Buffett’s 1977 article linking value to return on equity, inflation, growth, and time horizon, offered a superior valuation framework, however, since it offered a basis for assessing the value of long-term growth over an investor’s time horizon. To implement this approach to value investing, he founded Atlanta’s original-Equity Investment Corporation in 1986. He now applies these concepts from Buffett’s article in designing BI&R's model portfolios.


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1977 Buffett: How Inflation Swindles The Equity Investor

INVESTMENT PROCESS

Valuing Growth - BI&R value-investment process focuses on determining the value of ownership in a business given its ability to 1) earn a high return on invested capital, 2) reinvest those earnings productively for growth, and 3) do so for an extended period. Thus, unlike conventional Wall Street investment approaches that try to predict future earnings and ignore the value of growth, BI&R focuses on the long-term value of a business’s economic structure. Using a robust approach to valuation, BI&R tries to overcome the limitations of conventional valuation tools, such as price/earnings, price/book, and dividend yield.

Avoiding “Cheap Companies” Unlikely To Grow - BI&R seeks to avoid companies that appear cheap using common financial measures, but which are unlikely to resume or sustain growth. In doing so, BI&R looks for markers of companies with poor structural or managerial health.

Risk Control and Diversification - BI&R model portfolios are typically diversified relatively evenly over 35-40 firms, with sector limits to prevent over-betting of beliefs.

PORTFOLIO CHARACTERISTICS

Barksdale’s portfolio holdings have exhibited consistent characteristics over time, namely, above-average returns on invested capital and assets, long-term growth, and low levels of debt. These characteristics provide confidence that our holdings are better equipped than most to survive difficult times, protecting against permanent loss of capital.


BI&R portfolios typically reflect
above-market ROA and long-term growth
& Below-market levels of debt

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BI&R U.S. Equity Value Model Portfolio

DISCLOSURES

All performance references exclude the impact of management fees, and investors cannot directly invest in market indices. Jim Barksdale founded Atlanta’s original Equity Investment Corporation in 1986 and served as its Chief Investment Officer with sole veto authority until September 30, 2016. There, he was the single portfolio manager of the firm’s investment strategies from 1986-99 and was assisted after that by three investment team members who joined his firm in 1999, 2003, and 2005. The S&P 500 is a market-cap-weighted index comprised of the largest US stocks, and its constitution is the intellectual property of S&P Dow Jones. Past results do not imply nor guarantee future results. BI&R publishes U.S. All-Cap Value and Large-Cap Value model portfolios and is not a Registered Investment Advisor. Subscriber results may vary depending on the individual implementation of published model portfolios. All investing involves risk, including the risk of loss.