Sheets Smith Investment Management (SSIM) is a specialty investment firm that provides clients with innovative investment solutions that have performed competitively in all types of market conditions, especially in long-term declining markets. SSIM’s forte is the management of Balanced portfolios (ones holding stocks, fixed income, and cash equivalents) foundationally based on Dynamic Asset Allocation. The Sheets Smith Allocation Strategy is a complete investment process, offering a suite of portfolios options to meet the risk profile of the individual client, including an equity and cash portfolio for our most aggressive clients. Few managers offer such a complete process which attempts to actively manage portfolio risk AND at the same time, produce competitive returns.
Cornell Bowden, President and Chief Investment Officer, has managed portfolios using these strategies since the mid-1980s, including his time as Chief Investment Officer of Atlantic Capital Management, Ltd., and bringing the process to(SSWM) in 2003, including a performance record since 1999. The underlying investment process was conceived to measure the relative value of the Capital Markets of stocks, bonds, and cash on a risk-adjusted basis. This information obligates the portfolio manager to move portfolio assets from relatively over-valued ones to relatively under-valued asset classes. Why? To mitigate portfolio risk. The investment objective of all the strategies at SSIM is twofold: First, Preserve Capital; Second, make competitive returns. Why is the order of these objectives important? Smaller losses in market drawdowns provide more capital to invest when the markets rebound. Therefore, ours is a complete, client-centric investment process, focused on managing portfolio risk and volatility while strategically selecting the most appropriate stocks. Most equity managers only focus on beating a particular benchmark, remaining fully invested at all times.
The one constant in investing is “Change”. Therefore, since asset allocation determines the overwhelming percentage of the variation in total return, a sound investment strategy is of utmost importance. We believe the asset allocation in a portfolio MUST change when economic and market conditions change. Strategic, or fixed, allocation-based management styles, in our opinion, result in sub-optimal performance and increased portfolio volatility.
Why should you use SSIM? Investors today face markets with extreme daily volatility. They have few resources to effectively guide them. Market pundits give conflicting guidance. Company or industry research reports give little comparative information of other companies or industries, and rarely, if ever, give a sell recommendation. What is the individual investor to do? Our investment process should be given serious consideration. It is highly quantitative. Numbers have no feelings or opinion. However, they tell a compelling story, and they do change. Our analysis of these changes is conducted daily, and relevant decisions are implemented in client portfolios as necessary, especially in declining markets.
Our Equity Selection Strategy, including sell discipline, is another way we mitigate risk. We attempt to reduce large losses by selling aberrant stocks, particularly in bear markets. We may accumulate large cash positions in declining markets giving clients some comfort in tumultuous markets. Our research demonstrates that a company’s earnings growth relative to the earnings growth of the market has a direct correlation to the stock’s relative price performance. Therefore, our stock selections are concentrated in fundamentally strong stocks with above average earnings growth, positive earnings revisions, typically low debt and superior technical measures. The selection process is a mix of fundamental, growth, value, and technical analyses.
SSIM was formed in 2015 to have its performance record verified in accordance with the CFA Institute’s Global Investment Performance Standards (GIPS). SSIM’s clients include major brokerage firms. These firms require more stringent cybersecurity standards than those of RIAs. To meet those standards, SSIM will soon be separated from SSWM technologically and has an opened an office in Houston, TX.
Z. Cornell Bowden, Preident & Co-Founder
5600 Northwest Central Drive, Suite 221
Houston, TX 77092