Fundamental Value Investing
Investors using a value-investing approach look for stocks that are undervalued relative to underlying net asset value. The key differentiator between BIMC and other small Investment Advisors is that BIMC does its own fundamental equity analysis and stock picking. We make limited use of stock mutual funds, preferring to pick our own equities.
Our quest for value often leads to small- and mid-cap stocks, since these stocks tend to trade at lower price/earnings ratios. We believe smaller companies have greater potential for earnings growth or acquisition and therefore stock appreciation. We search for those firms that have solid financial numbers and have a permanent competitive advantage.
Your portfolio is reviewed often and rebalanced as required. Each trade is viewed in light of your risk tolerance, tax situation and the need to balance the asset allocation.
Diversification within a portfolio works to limit the volatility of a portfolio. We use this principal when constructing a portfolio to try to reduce market risk. BIMC invests in a mix of stocks, bonds and REITs. BIMC further diversifies by varying the industry, region and size of companies in which we invest. During this unsettled economic period, BIMC actively seeks investment vehicles that have a solid economic basis.
BIMC invests in bonds and bond funds as a risk avoidance vehicle, not a growth vehicle. Bond funds offer more liquidity than individual bonds. BIMC uses TIPS (Treasury Inflation-Protected Securities) and bond funds, both domestic and foreign.
Real Estate Investment Trusts have historically provided attractive returns since the inception of BIMC. REITs are an excellent diversification tool as their prices have low correlation with the stock market. REITs are considered a good hedge against inflation and enjoy favorable tax treatment. REITs also pay relatively high dividends, as they are legally required to pay out 90% of their taxable income.