- SECURITY SELECTION
- ETF HEDGING
- FIXED INCOME
Southport 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.
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 or economic sector changes, a stock eclipses our target valuation, or the portfolio becomes over-weighted in a particular holding, we 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 an 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 focus on quality by identifying A-rated or better securities which minimizes credit risk and structure laddered maturities to help reduce interest rate risk.
Understanding ETFs
What are ETFs?
ETF stands for exchange traded fund. An ETF is a security that holds assets such as stocks, bonds, or commodities, designed to track an underlying index such as the S&P 500. An ETF combines the diversification of an index fund with the flexibility of a stock.
Positive Aspects of ETFs
ETFs allow investors a simple way to invest in almost any industry, commodity, or specific region in the world. Unlike mutual funds, ETFs can be bought or sold throughout the trading day. An ETF can be purchased on margin and can be sold short, enabling the use of hedging strategies.
ETF Advantages
‐ Historically outperformed actively managed mutual funds
‐ Tax efficient with very low turnover
‐ Transparency of holdings
‐ Buying and selling flexibility
‐ Low cost
‐ Diversification
‐ Markert exposure and ease of rebalancing
‐ Ability to go short
Fixed Income
Southport Capital’s approach to fixed income investments is to maximize the overall portfolio and reduce risk. We “ladder” the maturities of investment grade bonds in helping clients reach their income needs, while maintaining a margin of safety. We further reduce interest rate risks and costs by holding our bonds to maturity. A conservative fixed income portfolio can help investors reduce volatility when combined with the inherent risks associated with an equity portfolio.
Examining the standard deviation between short and long term is proof of this risk.
| Treasury Maturity 1964-2007 | Annualized Standard Deviation % |
| 1 Month | 1.22 |
| 5 Months | 1.71 |
| 1 Year | 2.33 |
| 5 Years | 6.18 |
| 20 Years | 10.84 |
To learn more about Southport Capital’s fixed income strategy please request to see our 10 minute web based fixed income presentation. This presentation is designed to give the investor enough information about our fixed income strategy to make a decision to request a more detailed proposal.