Strategies For Institutional Investors/Non-Profits


Strategies For Institutional Investors/Non-Profits


At Connors, we don’t take a single approach to investing. Instead, we customize our approach to meet each organization’s financial goals, objectives, and ambitions. 

A. Connors Income and Growth Strategy (Large-Cap Stocks)

Strategy:

This strategy offers an advantage to investors seeking an expanding flow of dividend income coupled with equity appreciation. These two ends are by no means in conflict. Indeed, stocks of large, domestic companies with strong balance sheets, above-average earnings growth, and unusual records of dividend increases also perform well over time in the marketplace. Such stocks have also been somewhat less volatile than the Standard & Poor’s 500 Index.

Attributes:

  • Positive earnings and revenue growth
  • Historic and projected dividend growth
  • Price stability
  • Low debt to capital
  • Disciplined buy and sell criteria
B. Connors Small Companies Strategy

Strategy:

The aim of this strategy, which has been a specialty of Connors since our founding in 1969, is to provide returns greater than those of large company stocks. We define a “small company” as any publicly traded company with an equity market value between $500 million and $2 billion, though purchases may include companies down to approximately $250 million. Companies in which we invest are evaluated using a fundamental, bottom-up approach. Our search begins at the company level, where we scrutinize financials, the management team, competitive strengths and weaknesses, and return potential. Small company candidates are typically discovered through research conferences, regional and independent firm research, and in-house database screening. Our efforts result in a relatively concentrated portfolio of 25 to 30 holdings across the majority of economic sectors and a diversity of industries.

Attributes:

  • High potential return asset class
  • Exposure to less efficient market
  • Long-term firm and manager experience
  • Not appropriate for everyone since returns may be volatile

Connors Small Companies Strategy is based upon three, long-held fundamental beliefs:

  1. Small capitalization equities will continue to be among the highest long-term return asset classes of publicly traded securities.
  2. We believe in the ability to capitalize on market inefficiencies through in-depth fundamental research due to a lack of broad research coverage by Wall Street.
  3. There is greater opportunity to find “undiscovered” companies than in the crowded space of the most commonly followed stocks. There are also more small-cap stocks in which to invest relative to those generally considered large cap, thus providing a larger universe of potential investments.

Our Research Process:

Evaluating companies requires a significant amount of time. A primary component of the process is an assessment of the strength and integrity of the senior management team. This is usually achieved through one-on-one discussions with management, conferences and/or company visits. Discussions with company officers focus on learning the evolution of the company, its future goals, formal planning process, competitive strengths and weaknesses, and depth of management.

Additionally, we review SEC filings, company generated reports and third-party research. We also seek out industry professionals who may be able to provide valuable insight from a competitor/supplier viewpoint.

From this mosaic of information we conduct an independent analysis of earnings and valuation to estimate a likely return from an investment. Holdings and candidates are screened and ranked on a regular basis.  

C. Connors MicroCap Strategy

This strategy is available through Limited Partnership only.

Strategy:

This strategy combines fundamental, bottom-up research and proprietary screening processes on companies and the industries in which they operate. We further our process on select companies through meetings with company management. Our focus for purchase candidates is on companies with market capitalizations under $250 million, though purchases may include companies up to $500 million. We utilize information from a variety of sources including annual reports, company filings, research conferences, Wall Street and independent firm research, third-party database services and proprietary database information. Companies in which we ultimately invest are those that we believe are well managed with a seasoned management team and are financially strong with solid earnings growth potential.

Attributes:

  • High potential return asset class
  • Exposure to less efficient market
  • Long-term firm and manager experience
  • Not appropriate for everyone since returns may be volatile

Like our Small Companies Strategy, this approach is also based upon three, long-held fundamental beliefs:

  1. Small capitalization equities will continue to be among the highest long-term return asset classes of publicly traded securities.
  2. We believe in the ability to capitalize on market inefficiencies through in-depth fundamental research due to a lack of broad research coverage by Wall Street. This is particularly applicable to the companies considered to be "microcap."
  3. There is greater opportunity to find “undiscovered” companies than in the crowded space of the most commonly followed stocks. There are also more microcap stocks in which to invest relative to those generally considered large cap, thus providing a larger universe of potential investments.
D. Connors S&P 500 Index BuyWrite (BXM)(SM) Strategy

Strategy:

This strategy attempts to deliver attractive risk-adjusted returns by investing in a portfolio replicating the S&P 500 and systematically writing, or selling, S&P 500 Index call options against the portfolio, resulting in cash flows that moderate portfolio volatility and provide protection in down markets. Though portfolios will not participate in gains above the strike price of the call option, reducing upside potential in strong markets, the cash flows generally enhance returns in moderately rising and stable markets. Additional capital preservation strategies may be employed using exchange-traded options as market conditions dictate.

Attributes:

  • Protection in declining markets; enhanced return in flat markets; upside potential in moderately rising markets
  • Reduced volatility
  • May allow greater equity allocation
  • Transparency and liquidity
  • Limited upside in large market moves

Implementation:

  • A near-term S&P 500 Index (SPX) call option is written against the S&P 500 stock index portfolio with an exercise price just above the current level of the Index
  • The SPX call option has approximately one month to expiration
  • The cash received from the sale of the call option is added to the total value of the portfolio
  • The SPX call option is held to near expiration
  • There are three possibilities for the call option:
    • The S&P 500 Index level fails to rise above the strike price and the call option expires out-of-the-money (worthless, full value realized)
    • The S&P 500 Index rises above the strike price and the call option is in-the-money and is exercised for cash settlement
    • The S&P 500 Index is higher or lower than the strike price and we choose to roll the option prior to expiration
  • Monthly, after expiration of the call option, the process is repeated
E. Connors Covered Call Strategy

Strategy:

This strategy is designed to maximize risk-adjusted returns by combining long-term appreciation potential of stocks with the low volatility and capital preservation features of covered call option writing. The foundation of this approach is a portfolio of carefully selected large-cap equities. Our emphasis is on fundamental quality: strong profitability, low debt levels, and proven management. We sell covered call options against these underlying stocks. While this strategy reduces upside potential in very strong markets, it brings in an immediate cash return and reduces portfolio volatility.

Attributes:

  • Increased cash flow
  • Enhanced returns in down, flat, and modestly up markets
  • Strong risk-adjusted results
  • Limited upside in large upward market moves
  • Call premiums taxed as short-term gains

F. Connors International Developed/Emerging Strategy

Strategy:

This strategy is based upon the belief that the global economy provides attractive investment opportunities outside of the U.S. markets. It’s implemented through the use of low-cost, yet broadly diversified, exchange traded funds. Our efforts result in a portfolio of approximately 40 countries, both developed and emerging.



Contact Us


1210 Broadcasting Road Suite 200, Wyomissing, PA 19610
Phone: 610-376-7418 | 877-376-7418 Fax: 610-376-3181
Email: info@connorsinvestor.com | Office Hours: 8:30am to 5:00pm EST



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Carnival Macchia – Dale Chihuly
Connors Investor Services, Inc.
Please choose the area of interest below

1210 Broadcasting Road Suite 200, Wyomissing, PA 19610
Phone: 610-376-7418 | 877-376-7418 Fax: 610-376-3181
Email: info@connorsinvestor.com | Office Hours: 8:30am to 5:00pm EST