Victory Portfolio

Separately Managed Account

The WCA VICTORY PORTFOLIO seeks capital appreciation through a value-driven, flexible-mandate. Candidate companies may vary in size, sector, and style. When fully invested, the portfolio seeks to invest in 20-30 companies that are:

Growing

Portfolio candidates should have a demonstrated ability to grow shareholder value over time. The compounding effect of profitable growth is a powerful driver to returns and why this is a primary focus of our analysis.

Consistently Profitable

Not all growth is good growth. Growth can be achieved from unprofitable investments, but detracts from shareholder wealth over time. Therefore, we seek businesses that are demonstrating the profitable use of capital in generating cash flow and returns to investors.

Well-Capitalized

Companies should have relatively low amounts of debt. As a general rule, we believe that companies with less debt on the balance sheet have greater financial flexibility. This flexibility becomes even more valuable during periods of economic distress.

Attractively Valued

Candidate companies should trade at a discount to our estimate of intrinsic value under a set of conservative assumptions. In so doing, we hope to establish a “margin of safety” that helps us to avoid unnecessary risk without sacrificing return. In situations where valuations do not reflect underlying risk, the portfolio may hold cash.

Investment Process

From a universe of over 1,500 companies, we identify those that appear to be consistently profitable, growing, and well-capitalized firms. Candidate companies are subjected to a detailed financial analysis and quantitative valuation process in an effort to establish a reasonable estimate of intrinsic value. We consider qualitative aspects, including industry dynamics, competitive forces, and management quality, as part of a further due diligence process. Portfolios are constructed of 20-30 securities when fully invested with a typical position size near 4%. In situations where we are unable to find investments that meet our criteria, we may seek opportunities elsewhere or hold cash as appropriate. We will sell a security if the price moves beyond our assessment of value, long-run fundamental prospects decline, or if the balance sheet becomes excessively risky. We will continue to hold a security if the company’s earnings power and our assessment of value rises ahead of the stock price.

Our discipline is simple, rigorous, and systematic. We believe the wisdom of this approach is a key element to our long-run success.


Risk in Portfolio Management
There is more risk in the world than most people realize, and it is often inadequately measured. Here we look at how we measure risk and how quality can help address both volatility and unwanted surprises.
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Basic Math
Investing is not just about creating high returns but consistent returns. Therefore, we must contemplate how to address risk well in advance of demanding markets. This commentary addresses how some basic math can help explain the value of investing in high quality.
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What Price for Quality?
Easy money policies and rising debt lead us to focus on quality first. In past commentaries, we made a case for owning high-quality firms over low and offer an alternative to “growth and value.” This week, we want to explore how we think about what we pay to own high …
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The Magic Garden of Growth
The gardener must sow seed in fertile ground for a garden to grow. Once planted, young seedlings must be cared for and cultivated. If all goes well, the seed grows into an abundant garden, while also producing the seed and nutrients for next year’s plantings. In this way, the gardener …
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Illusion and Reality
Our economy grows decade to decade, with corporations capturing an increasing share of global income in the form of profits in recent years. Along the way, low interest rates prompted growth, encouraged risk-taking, and pumped up the value of future profits. It is not surprising, then, that stocks have enjoyed …
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Leverage and Quality
It is essential not to overlook critical assumptions. One of the most basic stock investing beliefs is that firms will continue to exist — firms do not live forever. Beginning as a start-up and ending in decline, firms undergo many changes over their lives. An idea becomes a business that …
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Disclosures