Johnston Investment Counsel's individual stock selection process seeks to purchase companies that exhibit the following characteristics:

• Attractive valuation characteristics (price to- earnings, book value, cash flow, etc),
  
• Growing sales, cash flow, and earnings,
  
• Profitable as measured by margins and return on capital measures,
  
• Relatively strong balance sheets, and
  
• Whose expected return, based on reasonable assumptions, is attractive.

To learn more about Johnston Investment Counsel's individual stock process download our "marketing one pager". You may also receive a more detailed presentation on Johnston Investment Counsel's individual stock services.

Johnston Investment Counsel is not driven by short-term trading strategies, but by fundamental analysis. We purchase stocks that not only meet our fundamental criteria, but are selling at a meaningful discount to our target price.

Often times, candidate stocks have "stumbled" in some way and the resulting decline in price provides Johnston Investment Counsel an opportunity to establish a position. Assuming the fundamental outlook for the company does not change, and a more attractive opportunity does not exist, Johnston Investment Counsel will be patient until the stock appreciates toward the target price.

Johnston Investment Counsel's individual stock selection process is implemented by:

1) Identifying Candidate Stocks

A composite stock ranking is calculated for each stock based on five major categories: valuation, growth, profitability, balance sheet and technical characteristics. Each stock is ranked versus the entire universe of stocks, as well as versus the stock's specific sector and industry.

In addition to specific fundamental factors, Johnston Investment Counsel will consider stocks that exhibit above-average expected returns or stocks identified from external sources.

2) Performing Qualitative Analysis

Qualitative analyses is conducted on stocks identified as having attractive fundamental characteristics and expected returns. This analysis will consist of: 1) historical trend analysis, 2) wall street research, 3) institutional holders, and 4) company reports.

3) Portfolio Construction

Portfolios will hold anywhere between 40 and 60 names. An individual stock position is limited to 5% of the portfolio's market value. Johnston Investment Counsel will not invest more than 30% (or three times the S&P 500 weighting -- whichever is less) to a single economic sector. A Johnston Investment Counsel portfolio will generally exhibit the following characteristics:

• Valuation characteristics similar to or lower than the market,
  
• Revenue, cash flow, and earnings growth that is similar to or exceeds the market,
  
• Profitability characteristics that are more attractive vis-a-vis the market and,
• Balance sheet characteristics similar to or more attractive than the market.
  

Click here to see Johnston Investment Counsel's existing portfolio characteristics.
Click here to see Johnston Investment Counsel's existing market cap allocation.
Click here to see Johnston Investment Counsel's existing sector allocation.

4) Sales Discipline

Johnston Investment Counsel will sell a security when: 1) the target price is reached, 2) a better opportunity exists, 3) the stock's fundamentals begin to deteriorate, or 4) the stock has a market adjusted loss of 25% from its purchase price (although depending on the reason for the decline in value, Johnston Investment Counsel may invest additional funds to lower the average cost.)

 

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