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Custom Portfolios

Portfolios are developed to create and maximize after-tax, after-fee returns for each client. With current emphasis on short-term performance results, many investors overlook the importance of long-term wealth accumulation, a critical factor being after-tax returns. Interest on bonds, dividends on equities, and long-and-short-termed realized gains or losses on any asset class are taxed differently and are incorporated into Weatherly¹s overall investment strategy for each client. As our principals have over 30 years of investment expertise, we understand the risk and return characteristics associated with various asset classes and investments and strive to build custom portfolios that beat benchmarks on an after-tax and after-fee basis over time. 

Asset Allocation 

We believe that one of the most important decisions investors must make is how their assets are best allocated between various asset classes, including stocks, fixed-income and cash equivalents. 

Depending on an investor’s risk/return profile, assets should be allocated to capture the bulk of the return of the equity and commodity markets with much less risk. High-quality, intermediate-maturity, fixed-income securities can be utilized to dampen this risk.  We also layer in covered call and option strategies as appropriate.  

Equity Management  

A "bottom-up" approach to investment selection is the foundation of the investment process. Instead of focusing on broad themes or sectors, we identify attractive companies using two essential criteria. First, we look for stocks selling at prices at which intelligent business persons with long-term horizons would be interested in buying the entire business. Second, we look for stocks that have the potential to generate strong returns without a lot of help from the broad market. While portfolios concentrate on individual equity selection, exchange-traded funds (ETFs) and no-load mutual funds are used as appropriate.  Depending on tax liabilities, equity investments, and portfolio turnover, qualified dividend-paying stocks may provide the best alternative on an after-tax basis.

Capitalization and Sector Diversification

Portfolios tend to concentrate on large-cap and mid-cap stocks, with no more than 10-20% of the portfolio invested in one sector to help insulate the portfolio throughout the business cycle. The equity component of our portfolios typically consist of 20-35 of our best equity selections, representing 2-3% positions each. 

Sale Decision

Stocks are considered sale candidates when: 1) the target price is reached; 2) a more attractive opportunity materializes; 3) the asset allocation is adjusted between stocks, fixed income or other asset classes; 4) the fundamentals of the company deteriorate.

Fixed Income Management

Weatherly Asset Management offers a range of fixed-income investments that are both tax-free and taxable. Fixed-income investments follow three broad investment criteria, all with a focus on high-quality, intermediate-maturity securities.

Maturity Management

Maturities of the portfolios are actively managed, based on the trend in interest rates, by utilizing a battery of quantitative models. As interest rates rise, portfolio maturities tend to be shortened to protect principal, and lengthened during a declining interest rate environment. 

Sector Diversification

Sector enhancement is an integral part of the portfolio strategy focusing on those sectors offering value. High quality securities from all sectors of the fixed-income markets may be purchased, including U.S. Treasury/TIPS, Government Agency, Mortgage-Backed, Asset-Backed, Corporate Securities and Preferred Stock. Municipal Securities will be utilized where appropriate for a client¹s fixed-income investments, depending on each client¹s circumstances. Weatherly Asset Management utilizes its expertise in the municipal market to evaluate securities that vary greatly in their credit quality, structure and volatility. Tax-free Municipal portfolios utilize General Obligation, Revenue, Pre-Refunded and Variable Rate sectors.

Individual Security Selection

Once attractive sectors are identified, Weatherly Asset Management scrutinizes available positions in an effort to locate the most compelling individual value within a sector. Value is measured by comparing the incremental spread between a specific security and a comparable Treasury. Historical spread levels and comparative value of like securities are critical in the assessment of each investment. Quality is never compromised. Bonds purchased are investment grade or better, and average credit quality is AA or better, depending upon client guidelines.