Philosophy

At Keene & Associates, one of the cornerstones of our investment approach is the thorough understanding of your financial objectives. After those objectives have been identified, it is critical to select the appropriate mix of stocks and bonds which we believe will best meet both your return expectations and your risk tolerance.

Equity Investments

We use sound, fundamental analysis to identify undervalued securities that offer superior total return potential with below average risk. Our value-oriented approach means that we invest in companies where the underlying earnings power, cash flow characteristics, corporate assets, or restructuring potential of the firm are not understood well — and therefore not valued properly — by other investors. We believe  successful investment ideas are a function of creative and independent research, two factors we strongly emphasize.

Our equity strategy is centered on being extremely price sensitive. We will not pay a high  price for a stock because it appears to be a “good story,” ignoring the underlying valuation metrics. Our goal is to not only understand key industry and company specific fundamental issues, but also ensure that the stocks we purchase meet our strict valuation screens. We quantify specific purchase and sell targets for each stock in our portfolios. While maintaining such a buy/sell discipline is not necessarily the norm for the investment industry as a whole, to us, it is a critical factor in controlling risk and creating the opportunity to achieve superior investment returns.

Maintaining a long-term perspective is an important part of our equity philosophy. A focus on short-term performance can result in excessive trading, unnecessary portfolio turnover, and below average returns. Studies have shown that trying to “time the market” can be extremely unproductive and costly. The stock market is inherently volatile over the short-term. Using a longer-term time horizon allows us to instill consistency and discipline into the investment decision making process, which is intended to benefit our clients through improved portfolio performance and reduced volatility.

Fixed Income Investments

Risk control is a dominant goal in our fixed income investment philosophy. Bond portfolios are constructed with a staggered maturity schedule to better control risk and provide a balanced income stream. By integrating our economic outlook with assumptions about the movement of interest rates, we adjust the maturity structure to achieve our goal of incremental returns. Typically, a fixed income benchmark is established which best reflects an investor’s risk profile. Once established, we utilize a “limited interest rate anticipation” strategy, in an effort to avoid dramatic changes in bond portfolio structure relative to the benchmark.

In addition to our interest rate anticipation strategy, we seek to exploit pricing discrepancies among the various sectors of the fixed income markets. Excessive yield differentials are detected through both maturity and sector spread analysis. Yield spreads generally reflect consensus assumptions about the economy and interest rate movements. At times when our independent economic analysis differs from consensus opinion, we will shift our fixed income portfolios to take advantage of excess return opportunities.

Mutual Fund Investments

Some investors choose to invest in mutual funds due to account size, the desire for more extensive diversification, or other personal reasons.  For those individuals, we purchase actively managed equity and fixed income funds. Our process of fund selection focuses on low-cost funds managed by investment managers that consistently apply identifiable strategies that are closely aligned with our own value discipline.  Quantitatively, we perform a thorough analysis on investment performance, management team, holdings, volatility, and fund size. Importantly, the long-term track record of these managers must reflect a favorable relationship between risk and return.

The construction of the portfolio requires a determination of how many funds to select, which funds to select, and in what proportions to achieve the targeted asset allocation. We consider the following factors in the portfolio construction process: allocation among asset classes, allocation between U.S. and international equities, diversification among investment styles, allocation between market capitalizations, sector and industry exposures, and fund valuation metrics.

Once a portfolio is initially constructed, we track the peformance and risk profile of each mutual fund held.  We also monitor numerous portfolio attributes to determine if any allocation changes are necessary to maintain original target allocation objectives.