Investment Philosophy - Core Equity

The Argus investment philosophy rests on the belief that investment returns from the stock market will continue to reflect the strong long-term expansion of the American economy. We believe that investors can best participate in this growth of the American economy through investment in a diversified equities portfolio -- a portfolio that incorporates many of the sectors and industries of the economy. Our stock selection, industry weightings, and daily rebalancing is designed to capture the long-term positive trend of the market, take advantage of short-term market volatility and limit downside risk.

Process

The portfolio management team meets regularly to discuss current and prospective holdings. Stock selection begins with an initial universe of stocks which is defined as the S&P 500 as well as non-index components that are covered by Argus Research Company. Research is conducted to identify what we believe to be high quality, large capitalization companies that exhibit above average financial strength, and to establish a company's competitive position relative to its industry peers. The portfolio managers compare a company's financial statements to those of its peer group. They look for strong balance sheets with low debt, high cash flow and continuing capital investment. Additional characteristics of industry leadership include a company management and/or a product that is widely respected, a constant stream of innovative and profitable products or services and a size or industry importance that permits standard setting and some price control.The result is a list of approximately 50 large capitalization companies that have above average financial strength and are leaders in their respective industries.New stocks are added to existing portfolios when there is an opportunity to enhance portfolio diversification.

Primary sources include 10Q, 10K and 8K filings and annual reports. Additional research resources include industry and trade publications, government data, and the entire research staff of Argus Research Company. We do not use research obtained through soft dollar commission arrangements of any kind.

Portfolios are constructed using a bottom up approach and hold 45 to 55 companies. Holdings are equally weighted, and that equal weighting is maintained by the counter-market rebalancing of holdings. This discipline is designed to convert sector and industry rotation along with individual stock volatility into excess return.