At Winans Investments, the investment process is defined by a rigorous mix of historical analysis, market monitoring, and diversified portfolio management. This approach has been honed over decades, aiming to provide clients with well-informed, strategic decisions in both growth and income investments.
Understanding the various components of this process can offer valuable insights into how investments are managed, with a focus on both long-term stability and the potential for growth.
We reached out to Kenneth Winans, the Founder and CEO of Winans Investment, for information regarding their proprietary process. He is a seasoned investment management entrepreneur with over 30 years of experience, known for his use of historical data in financial forecasting.
He founded Winans Investments, a top-rated firm specializing in tailored investment strategies across equities, fixed income, and commodities. Winans is also a respected author, having developed proprietary financial indices and published award-winning books on investment history.
Market Analysis: Understanding When to Buy or Sell
The foundation of successful investing lies in understanding the market environment. At Winans Investments, market analysis is a critical first step in the investment process, guiding decisions on when to buy or sell assets.
This analysis is not merely about observing current market conditions but involves a deep dive into the long-term trends that could influence the future of the markets.
Winans Investments has developed several proprietary indices and tools, including the Winans Preferred Stock Index™, Winans Real Estate Index™, Winans Legacy Stock Index, and Winans Trend Indicator. These tools are used to track and analyze the performance of various markets, offering a clear picture of where the market stands and where it might be headed. By monitoring these long-term trends, the firm can detect shifts in the market that may require adjustments to the investment mix.
One of the key strategies employed in market analysis at Winans Investments is the ability to maintain large cash positions or hedge against market volatility when market conditions are unfavorable.
This approach allows for flexibility and risk management, ensuring that the portfolio is not overly exposed during downturns. For instance, if major market indicators such as the S&P 500 Index or the Dow Jones Corporate Bond Average fall below their 200-day moving averages, it might trigger a decision to reduce exposure to riskier assets or increase cash holdings.
This disciplined approach to market analysis helps in making informed decisions on when to enter or exit positions, thereby protecting the portfolio from significant losses during turbulent times and positioning it to capitalize on favorable market conditions.
Investment Analysis: Deciding What to Buy or Sell
Once the market conditions are understood, the next step is to decide what specific investments to include in the portfolio. Winans Investments employs an approach to investment analysis, combining fundamental, quantitative, and technical analysis to make informed decisions.
Growth Investment Selection
In growth investing, the primary goal is price appreciation, and at Winans Investments, this is achieved through a careful selection of stocks, commodities, and real estate investment trusts (REITs).
Unlike many advisors who rely solely on fundamental analysis, Winans Investments blends fundamental data with quantitative and technical insights. This comprehensive approach allows for a more nuanced understanding of a company’s potential.
The process begins with a thorough screening of potential investment candidates. The focus is on the long-term historical performance of a company’s stock, as stock price movements often precede other financial and economic indicators. By identifying patterns in how a company’s stock has performed over time, the firm can anticipate future movements with greater confidence.
Portfolios designed for growth typically consist of a diversified mix of 20 to 40 holdings in US-based companies across various industries. The companies selected usually have medium to large market capitalizations, providing a balance between stability and growth potential. For smaller portfolios, exchange-traded funds (ETFs) are often used to ensure diversification and manage risk.
Once investments are selected, they are actively monitored. This ongoing analysis is crucial for identifying opportunities to buy, reduce losses, or take profits. The aim is to optimize the portfolio’s performance by adjusting holdings in response to market developments and individual stock performance.
Investment Income Selection
For investors seeking steady income with low volatility, Winans Investments offers robust capabilities in fixed- income and equity-income investments. This aspect of the portfolio is particularly important for clients who prioritize income generation over capital appreciation.
The firm’s approach to income investing is underpinned by proprietary systems designed to rate and monitor issuers of preferred stocks and bonds. These systems compare the issuer’s financial health against pre-established standards, ensuring that only high-quality investments are included in the portfolio. This ongoing review is essential, especially when there are corporate developments that could impact an investment’s performance.
A typical income portfolio at Winans Investments includes a mix of 20 to 40 holdings, comprising both corporate bonds and preferred stocks. The investments are carefully diversified across different issuers, industries, maturities, and investment types to minimize risk. Bonds are laddered with maturities ranging from 2 to 10 years, and the strategy often involves holding these investments to maturity or until the call date. This laddering approach helps in managing interest rate risk while ensuring a steady flow of income.
Active Management and Monitoring
At Winans Investments, the process doesn’t end with the selection of assets. Active management and ongoing monitoring are integral to the firm’s investment strategy. Markets are dynamic, and so too must be the management of portfolios. By staying vigilant and responsive to changes in the market environment, Winans Investments ensures that its clients’ portfolios remain aligned with their financial goals.
Active management involves adjusting the portfolio in response to both macroeconomic conditions and individual investment performance. Whether it’s rebalancing the portfolio to maintain the desired asset allocation or making tactical adjustments based on short-term opportunities, the firm takes a hands-on approach to managing investments.
This level of attention helps in mitigating risks and seizing opportunities that might arise due to market fluctuations.
For growth investments, active management might involve increasing exposure to sectors that are expected to outperform or trimming positions in areas that show signs of weakness. In the case of income investments, it might mean reallocating capital from lower-yielding bonds to those offering better returns, always with a focus on
maintaining the portfolio’s income-generating capacity.
Another key aspect of active management at Winans Investments is the regular review of each holding. The firm’s investment team constantly evaluates the performance of individual stocks, bonds, and other assets, comparing them against expectations and market benchmarks. This continuous assessment allows for timely decisions, whether it’s taking profits on a winning position or cutting losses on an underperformer.
The Importance of Diversification
Diversification is a cornerstone of the investment process at Winans Investments. By spreading investments across different asset classes, industries, and geographies, the firm reduces the risk associated with any single investment. This approach not only helps in managing risk but also enhances the potential for returns by capturing opportunities across various segments of the market.
In growth portfolios, diversification involves holding a mix of stocks from different sectors, such as technology, healthcare, and consumer goods. This spread helps in balancing the portfolio, as different sectors often perform differently depending on economic conditions. In income portfolios, diversification is achieved by holding bonds and preferred stocks from a range of issuers and industries, reducing the impact of any one issuer’s financial troubles.
Winans Investments also emphasizes the importance of geographic diversification. While the focus is primarily on US-based companies, the firm does not overlook opportunities in international markets. By including international exposure, the portfolio can benefit from growth in other regions while reducing the risk of being overly concentrated in one market.
The investment process at Winans Investments is a thoughtful and disciplined approach, grounded in historical analysis and active management. By combining market analysis with a careful selection of growth and income investments, the firm is able to create portfolios that are both resilient and positioned for growth. The emphasis on diversification further enhances the portfolio’s ability to withstand market volatility while capturing opportunities across different sectors and geographies.
