Relative Value Equity Fund - Overview
Coho constructs the Fund's portfolio with 20-35 stocks of high quality companies trading at reasonable valuations that it believes have and will continue to demonstrate long-term predictable growth in revenues, earnings and dividends. Coho's investment philosophy has been constant since the founding of the firm in 1999.
The Fund invests at least 80% of its net assets in dividend paying equity securities issued by larger-cap companies (over $3 billion). By utilizing a conservative, "bottom up" fundamental approach, the Adviser screens approximately 1,300 companies to identify those companies with:
- Stability – low variability in earnings, revenues, and dividends
- Growth – absolute and relative growth in earnings, revenues and dividends
- Profitability – low relative capital intensiveness and excess free cash flow generation
- Quality – balance sheet strength, management depth, integrity and execution
- Shareholder Focus – transparency of financials and operation strategy, capital allocation preferences - dividends, stock buybacks and acquisitions
Through a combination of quantitative and qualitative analysis, the larger cap universe is reduced to 250 companies (the "Coho 250"). The Adviser constructs a dividend discount model for each of these 250 companies to identify companies with reasonable valuations.
The Fund is generally comprised of 20 to 35 equity securities chosen because:
- They meet the Adviser's earnings and stability criteria, dividend and cash flow growth
- The Adviser has established comfort with the long term qualitative aspects of the investment
- The Adviser has talked with relevant management, competitors, customers and suppliers
- The Adviser's dividend discount model shows an expected excess return over the normalized risk-free alternative
- The Adviser has created a "Position Paper" to objectively identify and monitor major operating and financial metrics that Coho expects the company to maintain or achieve at specific points in time.
Free Cash Flow - A measure of financial performance calculated as operating cash flow minus capital expenditures.