In the search for superior returns, investors have tried many approaches. Most have been disappointing because they fail to deliver expected higher returns or only work for brief periods or under special circumstances. On the other hand, the value approach to investing has produced better than market results over many decades in both academic tests and professional use.
Our value approach involves selecting strategic stocks for investment from those selling at low prices versus some observable metric such as book value. Adding additional measures of value and including the concept of relative valuation creates a powerful investment decision-making methodology for both purchase and sale decisions. Our strategies include:
Cardinal Capital’s U.S. large-cap portfolio invests in 35 to 45 high-quality U.S. large-capitalization companies with the goal of providing long-term capital growth and steady dividend income.
Our non-US portfolio is constructed on the same value-oriented methodology as Cardinal’s U.S. composite. The portfolio invests in 40 to 50 non-U.S. companies primarily domiciled in developed international economies.
Cardinal’s small-cap portfolio seeks long-term capital appreciation from U.S. companies with market caps less than $4 billion, strong balance sheets, and positive earnings at attractive valuations.
Our balanced composite is comprised of approximately 70% large-cap U.S. equities, 25% high-quality bonds of laddered maturities, and 5% cash.
Cardinal Capital builds a ladder of short to intermediate-term bonds (10-year maximum maturity) to meet client cash flow requirements and purchase with the intention of holding these quality bonds until maturity. To maximize the risk reduction and cash flow attributes of bond investments, Cardinal Capital focuses on individual, marketable, high-quality bonds in constructing client portfolios. For taxable investments, we seek bonds rated A or better from issuers with low business and event risk.
For tax-exempt bonds, we confine our interest to issues backed by taxing power or essential service revenues. We require an underlying single A rating or better regardless of the existence of bond insurance.