Our Investment Approach
Northstar is fortunate to have experienced and skilled portfolio managers who deliver personal service and investment management that is tailored to meet clients’ specific needs. While many firms claim to provide the same features, the Northstar difference is that behind the service is a disciplined and consistent approach to asset allocation, security selection and risk management. All Northstar portfolio managers actively participate in the investment process, lending their insights and experience to the mix of ideas and innovative thinking that create our strategies.
The research team, which is made up of partner/portfolio managers and professional staff, meets regularly to exchange ideas and discuss news that affects their companies. This includes general market, technical and economic conditions as well as company results. Particular attention is given to a company’s cash flow and its ability to sustain and grow its dividend. Technical analysis is used to help identify buy and sell opportunities. These collaborative sessions provide an ideal forum for the dissemination of vital information and timely analysis to the portfolio managers.
Sound business fundamentals are critical elements found in successful enterprises. Some of the financial attributes that Northstar looks for before investing in a company include:
1. Growing earnings
2. Pays a meaningful dividend
3. Dividend is comfortably supported by company cash flow
4. History of dividend growth
5. Responsible use of debt
6. Attractive profit margins
Furthermore, companies that we invest in are typically leaders in their industry in terms of scale, reputation and innovation.
In the universe of publicly traded companies, finding those that consistently exhibit any of the above characteristics is difficult enough; finding those that exhibit all of them is what makes the Northstar difference.
Fixed Income Process
We look to the fixed income portion of portfolios primarily for attractive and predictable cash flows, and to provide a certain amount of stability for the overall portfolio. There are two primary risks involved in bond market investing: credit risk and interest rate risk. We address the credit risk, or risk of default, by focusing strictly on the highest quality bonds including U.S. Treasury obligations, government agency bonds, and investment grade corporate and municipal bonds. The monitoring of the credit worthiness is an ongoing process aided by outside research providers.
We mitigate the interest rate risk by sticking to the short-to-intermediate term maturities rather than long term bonds. For a given change in interest rates, long term bonds will fluctuate in market value much more dramatically than the short or intermediate term bonds. We also dampen the interest rate risk by staggering or laddering the maturities of the bonds purchased such that there will be maturities of bonds in regular intervals from the shortest maturity to the longest maturity. The result is a portfolio that functions as a hedge against the movement in interest rates.