Large Cap Core Equity

We believe the objective of core investing is long-term capital appreciation. We seek to accomplish this objective by investing in large capitalization companies that have predictable fundamentals, sustainable competitive advantages and high barriers to entry. Combining an extensive research-based stock selection process with quantitative risk management, we seek to identify companies that are expected to deliver consistent and competitive returns relative to its benchmark, the S&P 500 Index.

FMA's investment staff is composed of two teams - small cap equity and large cap/fixed income. FMA's large cap core equity product is managed by the large cap/fixed income team. All team members have significant investment experience as well as strong academic backgrounds. The investment team meets regularly to discuss strategy, portfolio holdings and buy/sell candidates. The firm's size facilitates continuous interaction among team members. Each member of the team is assigned analytical responsibility for several industries within the S&P 500. As such, each team member takes the lead in sector recommendations as well as idea generation. Each team member is responsible for staying abreast of the dynamics impacting their designated sectors, industries and companies.

A distinguishing factor of the stock selection process is our use of both top-down and bottom-up methodologies to construct portfolios. The team incorporates geopolitical, economic, currency, and interest rate expectations into its strategy and decision making. Using in-house research in cooperation with Wall Street, each team member builds an investment case for sector weight proposals and specific stock recommendations. The analysts base their rationale on relative valuation levels and their expectations for catalysts, which should positively impact earnings and promote cash flow growth. After identifying potential investment candidates, our analysts continue the due diligence process, which includes discussions with company managements, formulating earnings and cash flow projections, identifying potential catalysts, gaining a market perspective of forward expectations from both proprietary and third-party resources, and assessing both macro- and company-specific risks for the company under consideration. Furthermore, the analyst determines a price target for each stock and the team—as a whole—decides whether or not to include the security in the portfolio. Stock price deterioration exceeding 25% from cost may trigger the elimination of an entire position. The team leader has final discretion over the portfolio's holdings.

We construct a well-diversified portfolio that generally includes 50 to 80 stocks. Portfolio characteristics typically incorporate relative valuation metrics consistent with the S&P 500 Index and earnings growth characteristics superior to the benchmark. We invest large cap core portfolios in equity securities of companies with market capitalizations that are reflective of the market capitalization parameters of the S&P 500 Index. To ensure adequate diversification, no holding exceeds a 5% portfolio weighting with initial purchases in the 1% to 3% range.