STOCKS

Financial markets have always been cyclical.  Asset classes move in and out of favor and trends continually shift, giving temporary advantages to different investment styles and approaches.  In recognition of the market's cyclical and unpredictable nature, Vista diversifies among the different equity asset classes, styles and sectors.  This eliminates the nearly impossible task of trying to predict where market leadership will emerge next.

Vista's equity allocation is based on empirical evidence gleaned from historical market data.  Over the past 80 years, patient investors have been rewarded for favoring value stocks over growth stocks and investing in small caps, as well as large caps.  The observed "size and value effects" exist in domestic, international and emerging markets.  Through superior portfolio engineering, we can build portfolios capable of delivering higher returns with less risk.

Mutual Funds

Vista favors passively-managed index funds and exchange traded funds (ETFs) because of their low-cost structure, inherent tax advantages and superior long-term returns.  While many believe that an "expert" professional should be able to "beat the market," numerous studies show, on average, actively-managed mutual funds underperform the index.  When we select index and exchange traded funds, we look for:

  • Low expenses relative to other index funds
  • Tax-efficiency
  • Characteristics of the underlying index
  • Proven ability to effectively track the index
  • Reputation and experience of fund management

While we are highly skeptical of any fund manager's ability to "outperform" an index consistently, there are times when an index fund is not available.  In such cases, we will consider an actively managed fund.  The following is a list of some of the criteria we consider when selecting actively-managed mutual funds:

  • Low expenses relative to category
  • Manageable assets relative to category
  • Exceptional long-term relative performance
  • Low turnover

Funds are monitored to ensure they continue to meet our standards and are replaced when necessary.

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Individual Stocks

Vista invests in individual stocks in just one equity asset class: Large Cap Value.  While we generally favor the use of a large cap value index fund, individual stocks may be used when a client has a strong preference for individual securities or when a concentrated or low cost basis position exists.  In such cases, Vista can achieve adequate diversification in the large cap value asset class by complementing the existing position(s).  Using individual stocks allows us to control when capital gains and/or losses are realized in taxable portfolios and to further reduce costs by eliminating fund expenses.  The criteria we use to identify the stocks with the strongest "value" characteristics include:

  • Low stock price relative to book value, cash flow, earnings and sales when compared to the company's history, its competitors and the market
  • High dividend yield
  • Manageable debt level
  • Out-of-favor with Wall Street analysts

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