Portfolio Risk Management
“As independent owners, Edgewood's partners are free to make unbiased decisions. For example, we generate our own investment research, so we are not beholden to outside influences. ”
Edgewood’s Large Cap Growth Equity strategy pursues a bottom-up investment process to construct a portfolio of large-cap growth companies. Edgewood limits its position in any one security to an 8% cap and an industry cap not to exceed 25%.
Edgewood focuses on two distinct areas when managing the portfolio:
The investment team searches for companies that are well positioned for long-term growth, driven by demand for their products and services, trading at substantial discounts to their fair value, and are at an early stage in their profit cycle.
Based on the investment team’s fundamental analysis of a company’s profit cycle and using a five-year discount to present value model, portfolio holdings evolve through three phases:
In Phase One investments are in the early part of their profit cycle and will warrant a more sizable weighting once their profit cycle begins to grow;
In Phase Two investments are companies that are being increased to a larger weighting due to the relative attractiveness of their valuation in addition to the company moving through the strongest part of its profit cycle;
Lastly, in Phase Three investments are companies that are being reduced because they are nearing the team’s estimate of full valuation or their profit cycle has begun to deteriorate.