Income & Growth Portfolio
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Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Income & Growth Strategy
8 West 40th Street , 19th Floor, New York, NY 10018 ● 800.524.LEEB (5332) ● 212.653.1504 phone ● 212.246.3696 fax ● www.leebcapital.com
Contents
I. II. Firm Overview Investment Philosophy Page 3 Page 6 Page 7 Page 8 Page 12
III. Investment Process IV. Portfolio Construction V. Appendix
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 2
Why Leeb Capital Management?
• Recognized Thought Leadership: Identification of Critical Mega-Trends and Translation to Investment Performance – Dr. Leeb is the author of eight books, including a NY Times Best Seller. He also sits on various corporate boards where he shares his strategic perspectives on financial markets and natural resources. Extensive Experience: Reputable Investment Committee and Established Methodologies – LCM’s talented Investment Committee employs a disciplined investment process with the goal of outperforming over a complete market cycle. – The Investment Committee utilizes risk controls to improve the portfolio’s risk/reward profile as well as maintain diversification. Impressive Performance: Favorable Long-Term Returns Relative to Comparable Indices, Peers, and Risk* – LCM’s performance track record, which is verified by a reputable outside firm, places it in the upper echelon of similar managers. – Strong returns with a lower risk profile: LCM’s Large-Cap Growth strategy has historically outperformed the S&P 500 in both up and down trending markets since its inception (March 1999). Attentive Customer Service: Comprehensive Portfolio Management, Investment Advice, and Service – Multiple strategies, including Large-Cap Growth, Peak Resources & Energy, and Income & Growth.
•
•
•
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
* See Supplement for full performance information and important disclosures. Page 3
Leeb’s Thought Leadership in Mega-Trends
Advisory: • Head of Advisory Board for Leor Exploration & Production, LLC; Among transactions, sold energy business to Encana for $2.55 billion. • Advisory Board member of Electrum USA Ltd., one of the world’s largest privately held gold exploration companies, and Sunshine Silver Mines Corp., a privately held silver exploration company. Author: “The U.S. dollar is already vulnerable because of our dependency on other nations for basic materials. Out-of-control government spending will foster the perception that the United States is financially irresponsible, making foreigners lose confidence in the dollar.” Game Over: How You Can Prosper in a Shattered Economy (2009) “Prices will likely reach at least $100 a barrel before the decade is out.” – “In fact, there is good reason to think that within a fairly short time, gold, which in the 1990’s was one of the dismal investments around, will be soaring. It’s not far-fetched to think that within a few years gold may reach $1,000 an ounce.” The Oil Factor: Protect Yourself—And Profit— from the Coming Energy Crisis (2004) “For almost two decades, high-tech stocks have soared. But technological progress is slowing, and this slowdown will intersect with other key worldwide trends to create new boom markets.” Defying the Market: Profiting in the Turbulent Post-Technology Market Boom (1999)
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 4
Investment Committee
• Discusses a variety of topics including the economy, monetary policy, the direction of interest rates, energy prices, industrial trends, and other macroeconomic events that could impact a sector or industry • Establishes view of relative value expectations for sectors that are likely to outperform • Meets at least once per week • Low Investment Committee turnover; Current members are responsible for majority of track record*
Stephen Leeb, Ph.D. Stephen Leeb, Ph.D.
Chairman Chairman
Patrick DeSouza, Ph.D. Patrick DeSouza, Ph.D.
David Sandell, CFA David Sandell, CFA
Genia Turanova, CFA Genia Turanova, CFA
Roger Conrad, M.A. Roger Conrad, M.A.
Gregory Dorsey Gregory Dorsey
Macroeconomic analysis focuses fundamental research efforts and portfolio construction process; Industry/company earnings and growth estimates informed by top-down research.
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
* See Appendix for full Investment Committee biographies.
Page 5
Established Philosophy & Methodology
Our Income & Growth strategy focuses on:
• Securities of companies with strong franchise businesses that generate cash for income generation and can also expand their businesses for long term capital appreciation. • Healthy businesses on the basis of market share, leverage, dividend coverage ratios, business stability and vulnerability to event risk or regulatory concerns. • Diversifying portfolios across sectors to limit overall portfolio volatility. • Businesses that have a steady dividend payout and are positioned to increase dividends over time. • High quality fixed income investments. • Low portfolio turnover to limit trading costs, while maximizing dividend collection.
We believe income investors are best served by shares of dominant, financially healthy companies that can raise dividend payouts while also providing the growth necessary to outpace inflation and a diversified portfolio of fixed income securities.
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 6
Investment Process
Investment Universe:
• Our stock universe begins with the components of S&P 500 Index. • Additional stocks outside of the S&P 500 Index can be included if they satisfy our fundamental criteria. These stocks could be identified through our bottom-up research, discussions with Wall Street analysts, industry reports, the press, and other publications.
Top-Down Macroeconomic Analysis:
• Macroeconomic analysis focuses fundamental research efforts to core sectors; Industry and company growth estimates informed by top-down research.
Bottom-Up Fundamental Research:
• Companies within core sectors are evaluated to identify candidates that meet the following characteristics: - Strong balance sheets and steady businesses - High cash flows, attractive payout ratios - Ability to grow dividend payouts over time - Market capitalization greater than $3.5 billion
The resulting Watch List of approximately 150 stocks is further analyzed in the portfolio construction process.
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 7
Portfolio Construction
LCM Portfolio Managers utilize established fundamental research processes to delve deeper into the Watch List and construct an investment portfolio. This Bottom-Up research incorporates:
• Business Analysis – LCM places an emphasis on identifying companies with strong franchises that have:
– – – – Dominant industry position and market share. Franchise defined by differentiable product or service. Market position largely immune to competitive threats (high barriers to entry). Highly predictable cash flows, revenue and earnings streams.
•
Quality Analysis – LCM concentrates its efforts on finding sound investments that can withstand market turmoil. This quality comes in the form of:
– – – Balance sheet and financial strength. Above average dividend paying ability. Experience and stability of management. Strategic Vision for direction of business. Stability of revenues, profits, cash flows. Reputation of capable managers. Experience and a track record of success. Diversified holdings and durations. Reliable yield. Largely investment-grade ratings.
Page 8
•
Management Analysis – LCM invests in companies whose management team shows:
– – – –
•
Fixed Income Analysis – LCM looks to invest in a bond portfolio with:
– – –
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Portfolio Construction
LCM diversifies income-oriented portfolios across asset classes and security types for a total of 25-35 positions. The Income & Growth Portfolio allocation includes:
• Stocks with reliable income streams
– Utilities • Stable cash flows provide for dividend payouts, while select unregulated businesses provide opportunity for dividend growth and capital appreciation. Master Limited Partnerships (MLPs) • Largely fee-based business provides exposure to rising demand within energy sector, with less volatility than other equity investments. • Legal structure of Limited Partnerships provides for preferential treatment of income stream. Real Estate Investment Trusts (REITs) • At least 90 percent of taxable income is distributed to shareholders, while improving real estate market and occupancy trends lead growth. Telecommunications Services • Stable utility business generates cash flow to fund dividend payments, while the migration to broadband and growing demand for higher margin data services drives growth. Approximately 25 percent of overall portfolio made up of bond funds with low fee structures Positions of various durations Hedge US dollar exposure with Inflation Protected Securities and International Bonds Reliable cash flows with some equity upside
–
–
–
•
Fixed Income
– – –
•
Preferred stock, convertible shares, etc.
–
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 9
Sell Discipline
LCM Portfolio Managers adhere to strict sell discipline in an effort to minimize commissions and fees while maximizing the collection of dividends and interest. Positions are sold if any of the following occur:
• Company undergoes changes in its business fundamentals – LCM continues to monitor and evaluate a company’s competitive edge; a stock is sold should this edge be compromised or an event occur that threatens a company’s likelihood of meeting expectations. Such an event may be either macroeconomic or company-specific in nature. Price appreciation unbalances portfolio – In effort to maintain diversification, LCM will scale back or sell positions which grow to the point of unbalancing the overall portfolio. Dividend cut or questionable earnings stream – If a company’s fundamentals shift such that management is forced to cut dividend payments or future earnings streams are called into question, LCM will sell the position from the portfolio and replace it with a more stable and attractive alternative.
•
•
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 10
Risk Controls
Portfolio Level
Capitalization Capitalization • Max 20% of portfolio may be invested in securities with market-cap below $3.5 billion Sector Limits Sector Limits • Individual sector weight cannot exceed 2 ½ times the sector weighting of the S&P 500 and/or 30% of the portfolio Security Limits Security Limits • Unsponsored ADRs may not exceed 10% of the total portfolio • Credit Quality Credit Quality Portfolio’s average S&P Credit Rating greater than or equal to S&P 500 average
Security Level
Capitalization Capitalization • Seek market-cap greater than $3.5 billion • • Initial Position Size Initial Position Size 2% - 4% based on the risk of the underlying position Investments with market cap less than $3.5 billion have an initial position size of 2% or less • • Position Limits Position Limits 8% maximum weighting Typically not larger than 5%
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 11
Appendix
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 12
Investment Committee
Stephen Leeb, Ph.D., Founder and Chief Investment Officer As Leeb Capital Management’s Investment Committee Chairman, Dr. Leeb uses a systematic approach in evaluating market trends. His team of investment professionals combines knowledge of macro-economic trends, current market conditions and detailed fundamental research about specific companies. They apply this knowledge to guide decisions regarding which stocks are placed in portfolios under the Firm’s management. Dr. Leeb is responsible for coordinating the macro-economic analysis and his fundamental research focuses on the energy, materials, and industrial sectors. Stephen Leeb is the author of eight books. His latest book, Red Alert (Hachette, 2011), outlines how China’s growing prosperity and its demands on increasingly scarce resources threaten the American way of life. Dr. Leeb currently sits on the board of both public and private companies, including the advisory board to two sizeable precious metal exploration companies. He is also a recurring guest on Fox News, Bloomberg, CNN, and other media outlets. Dr. Leeb received his bachelor’s degree in Economics from the University of Pennsylvania’s Wharton School of Business. He then earned his master’s degree in Mathematics and Ph.D. in Psychology from the University of Illinois. Patrick DeSouza, J.D., Ph.D., President Joining Leeb Capital Management as President in 2008, Dr. DeSouza brings leadership experience that will reinforce our capabilities to deliver first-tier performance long-term. Dr. DeSouza is also CEO of the Plain Sight Group, a technology holding company centered at Yale University with various investments in private companies. Plain Sight and its team of Yale scientists have been working with Leeb Capital to develop next generation quantitative tools with the goal of providing Leeb Capital with an analytic edge. In addition to Plain Sight, Pat has twenty years of experience in investment banking and practicing securities law. Over the course of his career, Pat has significant experience with respect to billions of dollars of M&A and corporate finance transactions both in the United States and internationally. Dr. DeSouza has also served at the White House as Director for Inter-American Affairs on the National Security Council. In addition to several articles on economic policy, he is the author of Economic Strategy and National Security (Westview 2000) which includes contributions from former senior members of the Bush and Clinton Administrations. He is currently a visiting lecturer at the Yale Law School where he teaches a course on global wealth management. Dr. DeSouza is a graduate of Columbia College, Yale Law School and Stanford Graduate School where he wrote his doctoral dissertation on foreign investment in the United States. He is a member of the Council on Foreign Relations.
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 13
David A. Sandell, CFA, Vice President David Sandell joined Leeb Capital Management in 2004, and currently serves in the capacity of Vice President, Head Trader, and member of the Investment Committee. David provides fundamental research across various sectors while also managing firm operations and business development initiatives. David oversees the management of all client portfolios, while supervising trade allocations, execution and adherence to client-specific objectives, risk tolerance, and restrictions. He also supervises the firm’s performance calculation processes and the observance of applicable standards. David’s market observations have been quoted in the media including Wall Street Journal Radio, Reuters, BNN, and Bloomberg TV and Radio. Mr. Sandell graduated with honors from Washington University in St. Louis with a B.A. degree in finance and psychology. While at Washington University, David worked for Morgan Stanley as sales assistant. David is a CFA charterholder. Genia Turanova, CFA, Portfolio Manager Genia Turanova joined Leeb Capital Management in 2001, and currently serves as a Portfolio Manager and member of the Investment Committee. She provides fundamental research in multiple sectors. Prior to joining the LCM team, Genia was a research analyst with Independence Asset Management LLC in New York. She received her BS degree in Economics from Kharkiv National University (Ukraine), where she later taught for more than nine years. Ms. Turanova earned an MBA in Finance and Investments from the Honors MBA Program at Baruch College, CUNY in 2000. Genia is a CFA charterholder. Gregory Dorsey, Portfolio Manager Greg Dorsey joined the Leeb Group in 2004, and currently serves in the capacity of Portfolio Manager and member of the Investment Committee. Greg brings to the table 20-plus years of experience as a securities analyst and portfolio manager. He has written for and served as editor of several award-winning investment publications over the years and currently contributes to several Leeb Group newsletters. Mr. Dorsey co-authored Dr. Leeb’s latest book, Red Alert. Greg holds a BA degree in Economics and International Relations from the University of Delaware. Roger Conrad, M.A., Portfolio Manager Roger S. Conrad is a Portfolio Manager and member of the Investment Committee. He focuses primarily on securities that provide a combination of income and the potential for long-term capital appreciation. Roger has a long history of advising on income-producing equity securities. In 1989, he founded the Utility Forecaster newsletter, which has been named the Best Financial Advisory by the Newsletter Publishers Association (1997). It presents investment advice on electric, natural gas, communications, water, and foreign utility stocks, bonds and preferred stocks. Roger has worked with Leeb Capital Management’s Chairman, Stephen Leeb, since 1990 in various capacities. He has also co-authored two books with Stephen, Market Timing for the Nineties and The Agile Investor. Roger holds a B.A. in Anthropology from Emory University and a Masters of International Management from the American Graduate School of International Management.
Investment Committee
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 14
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Income & Growth Strategy
8 West 40th Street , 19th Floor, New York, NY 10018 ● 800.524.LEEB (5332) ● 212.653.1504 phone ● 212.246.3696 fax ● www.leebcapital.com
Contents
I. II. Firm Overview Investment Philosophy Page 3 Page 6 Page 7 Page 8 Page 12
III. Investment Process IV. Portfolio Construction V. Appendix
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 2
Why Leeb Capital Management?
• Recognized Thought Leadership: Identification of Critical Mega-Trends and Translation to Investment Performance – Dr. Leeb is the author of eight books, including a NY Times Best Seller. He also sits on various corporate boards where he shares his strategic perspectives on financial markets and natural resources. Extensive Experience: Reputable Investment Committee and Established Methodologies – LCM’s talented Investment Committee employs a disciplined investment process with the goal of outperforming over a complete market cycle. – The Investment Committee utilizes risk controls to improve the portfolio’s risk/reward profile as well as maintain diversification. Impressive Performance: Favorable Long-Term Returns Relative to Comparable Indices, Peers, and Risk* – LCM’s performance track record, which is verified by a reputable outside firm, places it in the upper echelon of similar managers. – Strong returns with a lower risk profile: LCM’s Large-Cap Growth strategy has historically outperformed the S&P 500 in both up and down trending markets since its inception (March 1999). Attentive Customer Service: Comprehensive Portfolio Management, Investment Advice, and Service – Multiple strategies, including Large-Cap Growth, Peak Resources & Energy, and Income & Growth.
•
•
•
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
* See Supplement for full performance information and important disclosures. Page 3
Leeb’s Thought Leadership in Mega-Trends
Advisory: • Head of Advisory Board for Leor Exploration & Production, LLC; Among transactions, sold energy business to Encana for $2.55 billion. • Advisory Board member of Electrum USA Ltd., one of the world’s largest privately held gold exploration companies, and Sunshine Silver Mines Corp., a privately held silver exploration company. Author: “The U.S. dollar is already vulnerable because of our dependency on other nations for basic materials. Out-of-control government spending will foster the perception that the United States is financially irresponsible, making foreigners lose confidence in the dollar.” Game Over: How You Can Prosper in a Shattered Economy (2009) “Prices will likely reach at least $100 a barrel before the decade is out.” – “In fact, there is good reason to think that within a fairly short time, gold, which in the 1990’s was one of the dismal investments around, will be soaring. It’s not far-fetched to think that within a few years gold may reach $1,000 an ounce.” The Oil Factor: Protect Yourself—And Profit— from the Coming Energy Crisis (2004) “For almost two decades, high-tech stocks have soared. But technological progress is slowing, and this slowdown will intersect with other key worldwide trends to create new boom markets.” Defying the Market: Profiting in the Turbulent Post-Technology Market Boom (1999)
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 4
Investment Committee
• Discusses a variety of topics including the economy, monetary policy, the direction of interest rates, energy prices, industrial trends, and other macroeconomic events that could impact a sector or industry • Establishes view of relative value expectations for sectors that are likely to outperform • Meets at least once per week • Low Investment Committee turnover; Current members are responsible for majority of track record*
Stephen Leeb, Ph.D. Stephen Leeb, Ph.D.
Chairman Chairman
Patrick DeSouza, Ph.D. Patrick DeSouza, Ph.D.
David Sandell, CFA David Sandell, CFA
Genia Turanova, CFA Genia Turanova, CFA
Roger Conrad, M.A. Roger Conrad, M.A.
Gregory Dorsey Gregory Dorsey
Macroeconomic analysis focuses fundamental research efforts and portfolio construction process; Industry/company earnings and growth estimates informed by top-down research.
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
* See Appendix for full Investment Committee biographies.
Page 5
Established Philosophy & Methodology
Our Income & Growth strategy focuses on:
• Securities of companies with strong franchise businesses that generate cash for income generation and can also expand their businesses for long term capital appreciation. • Healthy businesses on the basis of market share, leverage, dividend coverage ratios, business stability and vulnerability to event risk or regulatory concerns. • Diversifying portfolios across sectors to limit overall portfolio volatility. • Businesses that have a steady dividend payout and are positioned to increase dividends over time. • High quality fixed income investments. • Low portfolio turnover to limit trading costs, while maximizing dividend collection.
We believe income investors are best served by shares of dominant, financially healthy companies that can raise dividend payouts while also providing the growth necessary to outpace inflation and a diversified portfolio of fixed income securities.
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 6
Investment Process
Investment Universe:
• Our stock universe begins with the components of S&P 500 Index. • Additional stocks outside of the S&P 500 Index can be included if they satisfy our fundamental criteria. These stocks could be identified through our bottom-up research, discussions with Wall Street analysts, industry reports, the press, and other publications.
Top-Down Macroeconomic Analysis:
• Macroeconomic analysis focuses fundamental research efforts to core sectors; Industry and company growth estimates informed by top-down research.
Bottom-Up Fundamental Research:
• Companies within core sectors are evaluated to identify candidates that meet the following characteristics: - Strong balance sheets and steady businesses - High cash flows, attractive payout ratios - Ability to grow dividend payouts over time - Market capitalization greater than $3.5 billion
The resulting Watch List of approximately 150 stocks is further analyzed in the portfolio construction process.
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 7
Portfolio Construction
LCM Portfolio Managers utilize established fundamental research processes to delve deeper into the Watch List and construct an investment portfolio. This Bottom-Up research incorporates:
• Business Analysis – LCM places an emphasis on identifying companies with strong franchises that have:
– – – – Dominant industry position and market share. Franchise defined by differentiable product or service. Market position largely immune to competitive threats (high barriers to entry). Highly predictable cash flows, revenue and earnings streams.
•
Quality Analysis – LCM concentrates its efforts on finding sound investments that can withstand market turmoil. This quality comes in the form of:
– – – Balance sheet and financial strength. Above average dividend paying ability. Experience and stability of management. Strategic Vision for direction of business. Stability of revenues, profits, cash flows. Reputation of capable managers. Experience and a track record of success. Diversified holdings and durations. Reliable yield. Largely investment-grade ratings.
Page 8
•
Management Analysis – LCM invests in companies whose management team shows:
– – – –
•
Fixed Income Analysis – LCM looks to invest in a bond portfolio with:
– – –
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Portfolio Construction
LCM diversifies income-oriented portfolios across asset classes and security types for a total of 25-35 positions. The Income & Growth Portfolio allocation includes:
• Stocks with reliable income streams
– Utilities • Stable cash flows provide for dividend payouts, while select unregulated businesses provide opportunity for dividend growth and capital appreciation. Master Limited Partnerships (MLPs) • Largely fee-based business provides exposure to rising demand within energy sector, with less volatility than other equity investments. • Legal structure of Limited Partnerships provides for preferential treatment of income stream. Real Estate Investment Trusts (REITs) • At least 90 percent of taxable income is distributed to shareholders, while improving real estate market and occupancy trends lead growth. Telecommunications Services • Stable utility business generates cash flow to fund dividend payments, while the migration to broadband and growing demand for higher margin data services drives growth. Approximately 25 percent of overall portfolio made up of bond funds with low fee structures Positions of various durations Hedge US dollar exposure with Inflation Protected Securities and International Bonds Reliable cash flows with some equity upside
–
–
–
•
Fixed Income
– – –
•
Preferred stock, convertible shares, etc.
–
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 9
Sell Discipline
LCM Portfolio Managers adhere to strict sell discipline in an effort to minimize commissions and fees while maximizing the collection of dividends and interest. Positions are sold if any of the following occur:
• Company undergoes changes in its business fundamentals – LCM continues to monitor and evaluate a company’s competitive edge; a stock is sold should this edge be compromised or an event occur that threatens a company’s likelihood of meeting expectations. Such an event may be either macroeconomic or company-specific in nature. Price appreciation unbalances portfolio – In effort to maintain diversification, LCM will scale back or sell positions which grow to the point of unbalancing the overall portfolio. Dividend cut or questionable earnings stream – If a company’s fundamentals shift such that management is forced to cut dividend payments or future earnings streams are called into question, LCM will sell the position from the portfolio and replace it with a more stable and attractive alternative.
•
•
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 10
Risk Controls
Portfolio Level
Capitalization Capitalization • Max 20% of portfolio may be invested in securities with market-cap below $3.5 billion Sector Limits Sector Limits • Individual sector weight cannot exceed 2 ½ times the sector weighting of the S&P 500 and/or 30% of the portfolio Security Limits Security Limits • Unsponsored ADRs may not exceed 10% of the total portfolio • Credit Quality Credit Quality Portfolio’s average S&P Credit Rating greater than or equal to S&P 500 average
Security Level
Capitalization Capitalization • Seek market-cap greater than $3.5 billion • • Initial Position Size Initial Position Size 2% - 4% based on the risk of the underlying position Investments with market cap less than $3.5 billion have an initial position size of 2% or less • • Position Limits Position Limits 8% maximum weighting Typically not larger than 5%
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 11
Appendix
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 12
Investment Committee
Stephen Leeb, Ph.D., Founder and Chief Investment Officer As Leeb Capital Management’s Investment Committee Chairman, Dr. Leeb uses a systematic approach in evaluating market trends. His team of investment professionals combines knowledge of macro-economic trends, current market conditions and detailed fundamental research about specific companies. They apply this knowledge to guide decisions regarding which stocks are placed in portfolios under the Firm’s management. Dr. Leeb is responsible for coordinating the macro-economic analysis and his fundamental research focuses on the energy, materials, and industrial sectors. Stephen Leeb is the author of eight books. His latest book, Red Alert (Hachette, 2011), outlines how China’s growing prosperity and its demands on increasingly scarce resources threaten the American way of life. Dr. Leeb currently sits on the board of both public and private companies, including the advisory board to two sizeable precious metal exploration companies. He is also a recurring guest on Fox News, Bloomberg, CNN, and other media outlets. Dr. Leeb received his bachelor’s degree in Economics from the University of Pennsylvania’s Wharton School of Business. He then earned his master’s degree in Mathematics and Ph.D. in Psychology from the University of Illinois. Patrick DeSouza, J.D., Ph.D., President Joining Leeb Capital Management as President in 2008, Dr. DeSouza brings leadership experience that will reinforce our capabilities to deliver first-tier performance long-term. Dr. DeSouza is also CEO of the Plain Sight Group, a technology holding company centered at Yale University with various investments in private companies. Plain Sight and its team of Yale scientists have been working with Leeb Capital to develop next generation quantitative tools with the goal of providing Leeb Capital with an analytic edge. In addition to Plain Sight, Pat has twenty years of experience in investment banking and practicing securities law. Over the course of his career, Pat has significant experience with respect to billions of dollars of M&A and corporate finance transactions both in the United States and internationally. Dr. DeSouza has also served at the White House as Director for Inter-American Affairs on the National Security Council. In addition to several articles on economic policy, he is the author of Economic Strategy and National Security (Westview 2000) which includes contributions from former senior members of the Bush and Clinton Administrations. He is currently a visiting lecturer at the Yale Law School where he teaches a course on global wealth management. Dr. DeSouza is a graduate of Columbia College, Yale Law School and Stanford Graduate School where he wrote his doctoral dissertation on foreign investment in the United States. He is a member of the Council on Foreign Relations.
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 13
David A. Sandell, CFA, Vice President David Sandell joined Leeb Capital Management in 2004, and currently serves in the capacity of Vice President, Head Trader, and member of the Investment Committee. David provides fundamental research across various sectors while also managing firm operations and business development initiatives. David oversees the management of all client portfolios, while supervising trade allocations, execution and adherence to client-specific objectives, risk tolerance, and restrictions. He also supervises the firm’s performance calculation processes and the observance of applicable standards. David’s market observations have been quoted in the media including Wall Street Journal Radio, Reuters, BNN, and Bloomberg TV and Radio. Mr. Sandell graduated with honors from Washington University in St. Louis with a B.A. degree in finance and psychology. While at Washington University, David worked for Morgan Stanley as sales assistant. David is a CFA charterholder. Genia Turanova, CFA, Portfolio Manager Genia Turanova joined Leeb Capital Management in 2001, and currently serves as a Portfolio Manager and member of the Investment Committee. She provides fundamental research in multiple sectors. Prior to joining the LCM team, Genia was a research analyst with Independence Asset Management LLC in New York. She received her BS degree in Economics from Kharkiv National University (Ukraine), where she later taught for more than nine years. Ms. Turanova earned an MBA in Finance and Investments from the Honors MBA Program at Baruch College, CUNY in 2000. Genia is a CFA charterholder. Gregory Dorsey, Portfolio Manager Greg Dorsey joined the Leeb Group in 2004, and currently serves in the capacity of Portfolio Manager and member of the Investment Committee. Greg brings to the table 20-plus years of experience as a securities analyst and portfolio manager. He has written for and served as editor of several award-winning investment publications over the years and currently contributes to several Leeb Group newsletters. Mr. Dorsey co-authored Dr. Leeb’s latest book, Red Alert. Greg holds a BA degree in Economics and International Relations from the University of Delaware. Roger Conrad, M.A., Portfolio Manager Roger S. Conrad is a Portfolio Manager and member of the Investment Committee. He focuses primarily on securities that provide a combination of income and the potential for long-term capital appreciation. Roger has a long history of advising on income-producing equity securities. In 1989, he founded the Utility Forecaster newsletter, which has been named the Best Financial Advisory by the Newsletter Publishers Association (1997). It presents investment advice on electric, natural gas, communications, water, and foreign utility stocks, bonds and preferred stocks. Roger has worked with Leeb Capital Management’s Chairman, Stephen Leeb, since 1990 in various capacities. He has also co-authored two books with Stephen, Market Timing for the Nineties and The Agile Investor. Roger holds a B.A. in Anthropology from Emory University and a Masters of International Management from the American Graduate School of International Management.
Investment Committee
Leeb
Capital Management, Inc. Management, Inc.
A REGISTERED INVESTMENT ADVISOR AN AFFILIATE OF THE LEEB GROUP
Page 14