Epoch's investment approach is fairly consistent with our own investment approach: in a nutshell, focus on franchise type companies that generate excess cash and use this cash in shareholder friendly ways. Further, the firm's key messages from the July presentation are largely inline with much of what we've discussed here on CS$:
- uncertain job outlook, but slow recovery ongoing
- real estate is a big piece of the economy that is still slow
- focus on companies that generate consistent free cash flow and use excess cash flow in shareholder friendly ways, such as share repurchases and dividends
- international exposure is important from growth standpoint
- secular trends also important, with positive trends in technology, agriculture, and energy
- stocks more attractive than bonds given favorable yield differential
Ratio of equity free cash flow yields to bonds near 50 year highs:
Corporate profits and cash flow improving:
Companies are using excess cash to repurchase shares (positive sign):
A well-researched presentation with sensible recommendations.
Disclosure: no investments in Epoch funds or EPHC shares.
© 2010 Jeffrey Walkenhorst
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