Groesbeck Investment Management Corporation Our Growth of … · 2006-10-10 · community service....

Groesbeck Investment Management Corporation

Our Growth of Income Investment Management Process

Groesbeck Investment Management Corp.12 Route 17 North, Paramus, New Jersey 07652

201-291-7888

Growth of Income Investment Philosophy

“We seek to achieve three objectives:

• A superior dividend yield

• A rapid growth of the income stream

• A total return in excess of appropriate benchmarks

Our process not only tends to achieve the stated goals, but also offers an array of benefits many investors are pleased to have.

At Groesbeck Investment Management, you will find us highly customer friendly, flexible, and devoted to a very reliable investment process.”

- Robert P. Groesbeck

Groesbeck Investment Management2

Seeking Growth of Income Through Equity Management

Many investment pools require and desire high levels of income from their portfolios, in order to make either optional or required distributions. An equity portfolio seeking a combination of higher than average income plus capital appreciation may satisfy such goals.

A high quality portfolio holding stocks generating high yields and above-average dividend growth may also offer the investor the additional favorable attributes of :

Unusually stable portfolio returnsTop quartile performanceStrong balance sheets Less downside riskSuperior cash flows


Corporate Profile

Professional ExperienceRobert P. Groesbeck, CFA, has over 33 years of experience managing assets for taxable and tax-exempt clients. Bob started the firm in 1993.Robert P. Dainesi has 19 years of research and portfolio management experience. Bob joined the firm in 1993. Theodore M. Groesbeck, CFA, has ten years research experience. Ted joined the firm in 1999.

Consistency of Approach and ResultsResearch driven stock selection disciplinesProven philosophy over the long termSuperior risk- adjusted and absolute resultsMinimal dependence on market and street forecastsFundamentally driven stock selection and sell methodologiesContinuity of philosophy and strategy over many market cycles

Corporate StructureAn employee owned corporation managing $330 millionA client base including institutional pension plans , endowments, foundations, Taft Hartley, and taxable accountsEquity and balanced investment services


The First Step: Quantitative Analysis

Groesbeck Investment Management’s investment process begins with the search for:

Attractive Growth of Dividends - Compared with industry and market benchmarks. We buy companies which have increased their dividends each and every year.

Superior Dividend Rate - Dividends must be attractive relative to the S&P 500 and other alternatives.

Superior Sustainable Earnings Growth - Growing companies, based on reported earnings, producing earnings growth superior to the S&P 500. Our target is portfolio earnings growth of 10% or more.

Superior Revenue Growth - Positive growth of revenues from sustainable ongoing business operations.

Strong Financials - Ensuring companies purchased have strong balance sheets.

Payout Ratio - Ensuring that management is not paying out in dividends an excessive portion of earnings.

High Return on Equity - Investing in only companies having high return on equity, an important measure of overall corporate profitability.

Liquidity - We actively monitor the trading volume of all qualified stocks in an attempt to reduce market price impact.


The Next Step: Fundamental Analysis

For those companies possibly qualifying for our portfolio, we perform in-depth fundamental analysis:

Dividend CriteriaConsistent growth of dividends Dividend growth exceeding industry and market averagesPotential for significant growth

Validate FundamentalsUnderlying sales, earnings, margin trendsOperating & free cash flows Balance sheet strength

Evaluate BusinessMarket leadership and market shareIndustry outlookFactors affecting sustainability of sales and earnings

Valuation AnalysisP/E multiple on trailing earnings, relative to the S&P, its industry, and its history P/E relative to growth rate ( PEG Ratio) ; the current PEG Ratio is 1.5xAttractiveness of dividend yield

Our process avoids deep cyclical companiessuch as the paper, auto, chemicals, metals,

and transportation companies


Growth of Income: Relative Yield/ Relative Dividend Growth (6/30/04)

Dividend Growth(Last 5 Years)

Our portfolio yield is about twicethe yield of the S&P 500

1.7%

3.0%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Groesbeck S&P 500

2.5%

9.6%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Groesbeck S&P 500


Average Dividend Yield (1993-2003)

4.0

4.54.3

3.73.4

3.13.3

3.83.6

3.83.5

2.8 2.82.6

2.21.8

1.51.3 1.2 1.3

1.61.8

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Year

Perc

enta

ge

Groesbeck S&P 500


Current Portfolio Characteristics (6/30/04)

Earnings Per Share Growth (Last 5 Years)Return on Equity

21.0%

13.9%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Groesbeck S&P 500

5.2%

11.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Groesbeck S&P 500


Portfolio Statistics as of 6/30/04

Groesbeck S&P 500

Trailing P/E ( 1 year) 17.2 19.6(weighted average)

EPS growth-5 years 11.4% 5.2%

Dividend Yield 3.0% 1.7%

Dividend Growth -5 years 9.6% 2.5%

Average Return on Equity- 1 year 21.0% 13.9%

Weighted AverageMarket Capitalization $56 Billion $91 billion

Beta 0.83 1

Average Quality Rank A B+


Portfolio Construction: Growth of Income Process

Construction of a Diversified Portfolio Fully Invested At All Times 30-40 companiesApproximately 15 industries

Portfolio Sector Weights (6/30/04)

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

Finan

cial S

ervice

s

REITSConsu

mer Stap

les

Health C

areConsu

mer Disc

retio

nary

Industri

als

Materia

ls

Technolo

gyTele

communic

ation

s

Utilitie

s

Groesbeck S&P 500


Sell Disciplines

Over time our stock sales have increased the level of portfolio income.

Our reasons for selling:Weakening Revenues and Earnings Trends

We want to own companies producing growing revenues and earnings.

Declining Margins

A reduction in profit margins is often a warning for not only one stock but possibly several members of a sector.

Failure to Increase the DividendThis would cause an automatic review and, in most cases, elimination of the holding.

Reduced Growth Rate of DividendThis triggers a review and possible sale.

Positions Sold When Fully ValuedSuperior Alternatives

We monitor other candidates closely, and make portfolio changes which increase the income stream.Positions Trimmed as Prices Advance

Stocks exceeding 7% of the portfolio will be trimmed back to 5% or less.


Please see the performance tables on our website at www.groesbeckim.com


Growth of Income ReturnsGrowth of Income Returns


Growth of Income Returns

Return vs. Risk

Groesbeck Investment Management – Growth of Income


Growth of Income ReturnsGrowth of Income Returns

Up/Down Market Capture Ratio10 Years Trailing Ending 6/30/04

Up-Market Ratio Down-Market Ratio

5-25 %tile 25-50 %tile 50-75 %tile 75-95 %tile

Groesbeck Investment Management – Growth of Income – Gross Size

Universe: Mobius Broad Large CapBenchmark: S&P 500


Growth of Income Returns

Performance vs. Universe10 Years Trailing Ending 6/30/04

Alpha Beta R-Squared

Returns Standard Deviation Sharpe Ratio

75-95 %tileGroesbeck Investment Management – Growth of Income – Gross Size

5-25 %tile 25-50 %tile 50-75 %tile

Universe: Mobius Broad Large CapBenchmark: S&P 50


Representative Holdings (6/30/04)

The Growth of Income portfolio holds companies with strong balance sheets that achieve above-average earnings and dividend growth and high profitability.

Current Yield 5 Year dividend growth

Weingarten Realty 5.3% 5.5%Kimco Realty 5.1 9.2U.S Bancorp 3.5 19.0Marsh & McLennan 3.0 8.9Fannie Mae 2.9 13.7SouthTrust 2.5 16.7General Electric Company 2.5 11.9Johnson & Johnson 2.1 14.2Pfizer, Inc. 2.0 17.9Polaris Industries 2.0 15.2


Professional Biographies

Robert P. Groesbeck, CFA – President

Mr. Groesbeck is the founder of the firm and serves as the Senior Portfolio Manager for both equity and fixed income. He was formerly a Vice President of Argus Investors’ Counsel, where he was responsible for managing assets of $525 million. The largest single account was $200 million. His 41 years of investment experience span economic and investment research, security analysis with concentrations in twelve different industries, and portfolio management for both taxable and tax-exempt assets.

Mr. Groesbeck earned a BS degree in Economics from St. Peter’s College and an MBA in Finance from New York University. He is a Chartered Financial Analyst and a member of the New York Society of Security Analysts. He served continuously from 1971 through 2000 as Chair of the Planning Board for the Borough of Emerson, New Jersey, and was honored in 1993 by Bergen County and 2001 by Emerson for his many years of community service.

Robert P. Dainesi – Executive Vice President

Mr. Dainesi is a portfolio manager and the Director of Research. He joined the firm in November, 1993 and has 19 years of experience as an investment professional. He was a security analyst at Value Line and a portfolio manager with Sturdivant & Co. Prior to joining the firm, Mr. Dainesi was a portfolio manager and security analyst with Asiel & Co. Mr. Dainesi earned a BA degree in Economics from Queens College and an MBA in Finance from Bernard M. Baruch College. He is a member of the New York Society of Security Analysts and the CFA Institute.

Theodore M. Groesbeck, CFA – Security Analyst

Mr. Groesbeck is a security analyst with ten years experience. Prior to joining the firm in 1999, he was an analyst at Palisade Capital Management, Standard & Poors and Gruntal & Co. Mr. Groesbeck earned a BS degree in Finance from the University of Rhode Island. He is a Chartered Financial Analyst and a member of the New York Society of Security Analysts.

Nancy Wallace – Secretary/Treasurer

Mrs. Wallace is the Chief Financial and Administrative Officer. She is responsible for portfolio administration, trading follow-up, and client service. She has 12 years experience in the non-profit sector, having served as a professional director with budgeting, client service and supervisory responsibilities. She joined the firm in July, 1993. Mrs. Wallace earned a BS degree in Accounting from Fairleigh Dickinson University. She served from 1981 to 1997 as an elected trustee of the Board of Education for the Borough of Fair Lawn, NJ.


Institutional ClientsSince

The Margaret L. Wendt Foundation 1972

The Waite-Brand Foundation 1975

Homemakers Upstate Group 1980

Episcopal Church Home Foundation 1981

The Ritter Foundation 1984

Pediatric Associates Benefit Plan 1987

Sweetser Children’s Services 1989

Ozone Confectioners & Bakers Pension Plan Trust 1992

Beyer Employees Profit Sharing Plan 1996

Matthews Panariello PC 401K 1998

Virginia Quality Life 2000

Trinity Episcopal Church 2000

Bricklayers and Allied Craftworkers Local #2 Pension Fund 2002

Harder Foundation 2002

Wilmurt Lake Club 2003

Counsel Trust 2003The above list of clients includes all institutional relationships with the firm. No individuals or WRAP clients are included in this list. Compilation of this list does not use any performance-based

criteria. It is not known whether the listed clients approve or disapprove of Groesbeck Investment Management Corp. or the advisory service provided.


Fee Schedule

1% per annum First $10 million

¾ of 1% Next $20 million

5/8 of 1% Next $20 million

½ of 1 % Above $50 million

Fees are negotiable.


A Summary: Repeatable Factors Contribute to the Success of the Process

We focus on a process we can control – producing a growing stream of dividend income at a rate higher than the market.

The relatively high dividend yield of our portfolio gives us an immediate advantage of 130 basis points or more over the S&P 500 return.

Our buy discipline helps us to avoid over-valued sectors of the market. We will not buy stocks of companies which neither pay a dividend, fail to produce a sustainable growth of earnings, or trade at excessive valuations.

Our approach concentrates on companies with reliable and consistent revenue and earnings, enabling them to sustainably increase dividends.

The search for dividend growth requires us to reallocate capital from stocks having high valuations to more moderately valued issues. As prices increase, dividend yield will frequently decline, leading us to substitute another stock having a higher yield and a lower valuation.

High-yield and high-quality A-ranked stocks by S&P tend to provide a cushion against market declines.

The Growth of Income strategy has produced a 10-year annualized return that exceeded the S&P 500 by more than 3.0%, participating 79% in up markets, but only 37% in down markets.


Groesbeck Investment Management Corporation Our Growth of … · 2006-10-10 · community service....

Documents

Transcript of Groesbeck Investment Management Corporation Our Growth of … · 2006-10-10 · community service....