Equity Portfolio Management

Amit Khandwala
Wright Investors’ Service
Senior Vice President - International Equity Management
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Investment Philosophy
We Believe:

 Investment behavior creates opportunities

that passive management does not fully
capture

 A systematic disciplined investment

process incorporating both quantitative
and qualitative elements identifies
companies with above average return
potential
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Investment Process: A Disciplined Approach

Appropriate Style Universe

Quantitative Analysis

Capture Quality Ratings and Fundamental Ratios

Portfolio Optimization

Qualitative Analysis

Price Momentum / Earnings Outlook /Exogenous Factors

PORTFOLIO

Portfolio Monitoring
Re-optimization
Sell Disciplines
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Quantitative Ranking Model

1. Proprietary Quality Rating

32 specific standards in four categories including Factor
liquidity, financial strength, profitability and growth weightings

are
2. Earned Return
dynamic
A measure of return to investors
and are

3. Valuation-Adjusted Earned Return regularly

Historic R.O.I. adjusted for current valuation reviewed to

validate
4. Earnings Momentum
predictive
Combines Wright’s historic earnings measures and
projected consensus earnings strength.
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Quality Rating

32 SCREENS OF THE WRIGHT QUALITY RATINGS

4 MAJOR
WRIGHT Index of Minimum Standards for Listing on INVESTMENT
QUALITY QUALITY
RATING The Approved Wright Investment List QUALITIES
32 Specific
Investment Quality Averages of All Stocks on "The Approved Wright Investment Quality
List" - Minimum Listing Requirement Standards Standards RATING:
INVESTMENT MARKET VALUE EXCHANGE SHARE-
TRADING TURN- INSTITU- CLOSELY
ACCEPTANCE
A: Outstanding
TOTAL PUBLIC
VOLUME OVER MARKETS TIONAL HOLDERS HELD 28,000
All Shares Excluding RATE INVESTORS SHARES INVESTMENT
B: Excellent ACCEPTANCE
Outstanding Closely Held % of Total
C:
D:
Good
Fair
3 Year Average/
Current
3 Year Average/
Current
3 Year
Average/
3 Year Number of names are
Average/ Funds,
Last 12 Months Current Insurance Cos.
FINANCIAL
SHAREHOLDERS' PRE- LONG TOTAL FIXED LIQUIDITY WORKING
+ screened
STRENGTH
EQUITY FERRED TERM DEBT CHARGE QUICK CAPITAL
STOCK FINANCIAL
DEBT % OF COVERAGE RATIO
TOTAL % OF CAPITAL
Equity, Pfd Stock CAPITAL RATIO
STRENGTH through a
Capital &
Surplus & Long Term Debt % of Capital % of Capital Cash & Current Ratio
Equity, Pfd Stock Equity, Pfd Stock Equity, Pfd Stock Receivables/ Current Assets/
proprietary
& LT Debt & LT Debt & Long Term Debt Current Liabilities Current Liabilities

PROFITABILITY PROFIT RATE OF CASH EARN RETURN RETURN PRE-TAX OPER INC OPERATING
+
& STABILITY EARNINGS ON EQUITY ON INC TO to TOTAL INCOME
ON EQUITY CAPITAL ASSETS TOTAL ASSETS
PROFITABILITY process to
& STABILITY
BASIC TIME-WTD ASSETS % of
TOTAL
TIME-WEIGHTED STABILITY
NORMAL TREND AVERAGE
& TREND
INDEX Adjusted
Annual Rate (1)
CAPITAL
Adjusted Rate assign a
GROWTH NORMAL CASH EARN PER SHARE EARNED DIVIDEND OPERATING ASSETS SALES/REV
+
EARN GROWTH STABILITY EQUITY GROWTH INC GROWTH GROWTH GROWTH quality
GROWTH INDEX GROWTH GROWTH
Adjusted
Annual Rate
Adjusted
Annual Rate Annual Rate
Per Share
Annual Rate
Per Share
Annual Rate
Per Share
= rating
Per Share (1) Per Share (2)
INVESTMENT
QUALITY

INVESTMENT ACCEPTANCE + FINANCIAL STRENGTH

+ PROFITABILITY & STABILITY + GROWTH
= INVESTMENT QUALITY
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Quantitative Ranking Model

1. Proprietary Quality Rating

32 specific standards in four categories including Factor
liquidity, financial strength, profitability and growth weightings

are
2. Earned Return
dynamic
A measure of return to investors
and are

3. Valuation-Adjusted Earned Return regularly

Historic R.O.I. adjusted for current valuation reviewed to

validate
4. Earnings Momentum
predictive
Combines Wright’s historic earnings measures and
projected consensus earnings strength.
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Qualitative Analysis – Porter’s Five Forces

Threat of new entrants

Bargaining
Bargaining Rivalry among power
power existing firms of
of buyers
suppliers

Availability of
substitutes
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Sector/Country Allocation

 Economic outlook

 Political environment

 Regulatory issues
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Portfolio Construction

 Portfolio optimizer seeks to minimize benchmark

variance

 Portfolios are monitored constantly and re-

balanced periodically
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Summary

QUANTITATIVE

Quality Rankings
Ranking Model
Optimization

QUALITATIVE
Porter’s Five Forces
Market trends
Technical trends
Exogenous Factors

FINAL PORTFOLIO

PORTFOLIO
REVIEW

Sell Discipline
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Questions