Security Selection

The Southport Capital investment process utilizes a combination of top-down review and macro indicators coupled with sound fundamental analysis. It is through this disciplined security selection process that Southport Capital develops opinions on sectors that are positioned for outperformance, and within those sectors, which stocks—or ETFs—are positioned for additional return. As compared to traditional bottom-up research, Southport Capital has incorporated macro opinions into the stock selection process, which has brought added value in crafting optimal portfolios in various market conditions.

When selecting stocks to be included in a portfolio, we at Southport Capital rely on our in-house process of quantitatively screening for stocks that meet our stringent investment criteria. Using a research profile supported by an extensive database, we evaluate information on over 9,500 domestic stocks.

Two important characteristics define the selection stage of the Southport process.

First, selections are made by our portfolio managers using our own in-house research and evaluation tools.
Second, it is collaborative—with all our portfolio managers intensely debating the merits of each investment candidate.

After significant review, if individual securities do not meet our investment criteria, we will use ETFs to meet our sector weighting requirements and to meet diversification needs.

Knowing when to buy is only part of the equation! We also employ a very disciplined and deliberate process on the sell side. If the underlying investment premise for a company changes, a stock eclipses our target valuation, or the portfolio becomes over-weighted in a particular holding, we immediately analyze the situation and respond accordingly.

A few words about Fixed Income securities. While we are driven by the belief that equities should comprise the predominant share of investment portfolios, we also believe that a small allocation of bonds can provide valuable diversification. In addition, we also recognize that for investors with a lower risk tolerance or specific current income needs, fixed income securities may need to play a greater role within the portfolio.

Our approach to bond investing is very similar to our equity process. We use disciplined analytical research to understand the critical economic factors that will drive long-term interest rates and identify A-rated, or better, securities to minimize credit risk and structure laddered maturities to exploit projected interest rate movement.