Position Sizing - Typically, initial portfolio positions are equally weighted in dollars at 1.0 to 1.5% of total portfolio value. A fully invested portfolio (less than 5% cash) is ordinarily maintained. However, unfavorable economic conditions may dictate allocating a portion of assets to cash. Every effort is made to maintain similar sector weightings for all portfolios under management. It is anticipated that at any given time portfolios will hold 1% to 7% of assets in each of 30 to 50 companies although market conditions may dictate holding fewer positions.

Tax Efficiency - The bulk of our managed assets are taxable. Consequently, we are sensitive to the tax consequences of our investment decisions. The following techniques and strategies are used to mitigate our clients' tax burden:

  • Maintain low portfolio turnover (typically 25-40% per year).
  • Emphasize long-term realized gains.
  • Use tax lot accounting.
  • Take losses when appropriate.
  • Communicate with clients during the tax year to be sure the amount of realized gains is consistent with their needs and circumstances.

Benchmarks - Towle & Co. makes no attempt to manage portfolios against a specific benchmark. Our decision to invest in particular sectors or industries is a function of where we find the greatest value. Compared to the Russell 2000, Towle & Co. tends to invest in companies with lower multiples to book value, sales, earnings, and cash flow.