S&P 4

The S&P 4 is a large cap equity model portfolio that seeks to maximize capital appreciation by blending four underlying sub-strategies.

S&P 4

The S&P 4 is a large cap equity model portfolio that seeks to maximize capital appreciation by blending four underlying sub-strategies.

Each sub-strategy has a distinct objective:

  • Competitive Advantage combines profitability with value, seeking to identify companies with strong return on invested capital that trade at attractive valuations.
  • Dividend Income & Growth selects companies that have demonstrated strong earnings quality, strong credit quality, and attractive dividend yields for each sector.
  • Intrinsic Value seeks to identify undervalued, but higher-earning companies that generate strong free cash flows.
  • Total Yield selects companies that return cash to shareholders and bondholders.

S&P 4 Investment Methodology

Diversified & Balanced Sub-Strategies

Each sub-strategy has a distinct objective, but falls into one of two themes: companies with attractive profits or those who return earings to shareholders. Sub-strategies independently select 30-33 stocks each on the rebalance date. All four sub-strategies are rebalanced once a year to equalize each strategy’s weight in the model portfolio.

Embedded Risk Management

S&P Global Quality Rankings are used in each sub-strategy’s selection criteria. Quality Rankings are a measure designed to capsulize growth and stability of earnings and dividends. They are used in an effort to avoid low-quality stocks that typically underperform in bear markets.

Efficient by Design

Stock selection follows a strict quantitative model for each sub-strategy’s objective. Disciplined quantitative strategies can eliminate bias risks, like prior winner attachment or regret/pain aversion. Stocks are selected with a buy-and-hold philosophy, so they normally remain in the portfolio unless there is a merger or another exceptional circumstance.