Hays Advisory manages portfolios using a "top-down" investment style that incorporates the firm's proprietary tactical asset allocation model. From the asset allocation model (the top), to the sector weighting and stock selection (the bottom), the firm incorporates a definable, quantitative approach. The process begins with deciding how much should be placed in stocks, bonds and cash. Once the overall asset allocation has been established, the investment committee determines how much to overweight or underweight each major sector and then picks the stocks within those sectors that pass quantitative screens and other fundamental and technical analysis.
The goal of this disciplined approach is to prevent Hays Advisory from making emotional, irrational decisions that might be contrary to the client's best interests. Ultimately, the discipline guides the investment committee in identifying potential stocks in attractive industries during favorable market cycles. During unfavorable market trends, the discipline is designed to find more defensive stocks, while maintaining a higher weighting in bonds and cash.
Our Top-Down Process
Asset Allocation Model
The Hays Asset Allocation Model determines four factors as having the most significant correlation to stock market performance:
· Investor Psychology
· Monetary Conditions
· Market Valuation
· Market Trend
Based upon the correlation to past market performance, indicators measuring Investor Psychology, Monetary Conditions, Market Valuation and Market Trend are measured, weighted and scored. The total score of these indicators determines the firm's recommended asset allocation. Hays Advisory's discipline is designed to move assets away from stocks when the model indicates higher market risk and allocate more assets to stocks when the long-term outlook improves. This approach is not a short-term market timing strategy. It is also unlike a typical "style-box" strategy that remains fully invested in all market environments regardless of the risk/reward potential.
Industry & Sector Studies
After the firm decides how to divide money between the different asset classes, it takes an in-depth look at the 100 individual industries of the economy to determine those that are positive and improving. The 100 industry groups are divided into ten general market sectors.
Using proprietary methods, the discipline identifies the industry groups that are showing gradual improvement in both fundamental rankings (earnings momentum and relative valuation) as well as market action (relative price momentum). Once the improving sector moves into the top 50%, it begins to receive consideration for the portfolio. Hays Advisory's sector discipline strives to keep client assets over-weighted in the favorable sectors that are outperforming and under-weighted in the sectors that are underperforming.
At this stage in the process, the first two important steps have been fulfilled: determining the proper percentage of assets to be deployed in stocks, bonds and cash, and selecting the sectors in which to concentrate the stock selection.
Stock Selection
The last stage of the "top-down" discipline involves selecting individual stocks that fit the historical patterns that typically have provided above-average performance.
Utilizing a combination of both fundamental and technical analysis, Hays Advisory selects individual stocks that rank in the top 30% of all stocks based upon the earnings momentum, relative strength and relative valuation. Finally, the investment committee does technical analysis on the selected stocks to determine the final buy candidates.
Equity/Balanced Products
The firm offers three equity portfolios for different types of strategic investors: Long-term Growth portfolio, Moderate Growth portfolio and Conservative Growth Portfolio. These portfolios allow a client to invest to the level of risk that fits their long-term goals and personality. The more conservative a client, the lower the percentage of his/her portfolio will be allocated to the more volatile equity asset class.
