Investment Philosophy and Style

Philosophy

Long Point Financial Planning (LPFP) offers investment management advisory services based on a research approach that incorporates security selection within an asset allocation framework designed specifically for each client.

 

The LPFP investment decision-making process is guided by our philosophy regarding how equity and bond markets behave and evolve over time. This philosophy is firmly rooted in academic research in the fields of economics, finance and behavioral science, as well as in our substantial experience in securities research, risk management, and portfolio construction.

 

We view the appeal of any investment opportunity as a function of its business fundamentals and its risk profile. We believe that:

• Company and industry fundamentals have a life cycle;

• Changes in business fundamentals eventually determine long-term asset prices;

• The critical challenge of the investment manager is to ascertain the current stage of a company's and industry's life cycle, its likely evolution over the intermediate term, and the various risk factors associated with the various life cycle stages.

 

Investment Approach

 

We believe that the mainstream investment industry has become too “style-box” driven and has lost sight of its twin fundamental financial objectives: income generation and capital growth. Both objectives need to be achieved within a capital preservation mindset. The judicious balancing of risk and reward is at the heart of all our investment decisions. The total return potential of investment opportunities in the equity and bond markets arises from three main sources:

 

•  Income generation in the form of dividends (for stocks) or coupon payments (for bonds)

 

•  Future growth of profits (for stocks)

 

•  Changes in the price investors are willing to pay for the stream of earnings (price-to-earnings ratio for a stock), or for the stream of coupon payments (interest rate changes)

 

At LPFP we are style agnostic in that we focus on the total return of an investment opportunity as opposed to any single return sub-component. We believe that capital markets are dynamic and that, as a consequence, not only does the return potential of investment opportunities change over time, but the source of returns changes as well.

 

Portfolio Construction | Investment Advisory Services Options