Investment Process

Overview

The Investment Committee is the foundation of our group decision-making process. The committee, which is comprised of seven senior principals and four ex-officio members, is responsible for the firm’s portfolio structure and all investment decisions. The Investment Committee directs and monitors the firm’s extensive, internal research efforts and oversees the portfolio management function.


Fundamental Analysis

Our predominantly bottom-up investment decision-making process strives to identify leading companies in structurally attractive industries. The Investment Committee relies primarily on the fundamental research of our in-house analysts to evaluate the long-term attractiveness of various industries and to access the competitive strengths of industry participants. We seek to emphasize businesses where competitive advantages can be maintained, where earnings streams are sustainable and growing, and where valuations are judged to be reasonable. Our research-driven discipline can result in allocations that differ significantly from the S&P 500 weightings. Even in sectors or industries that have approximate market parity, the composition of the sector or industry in our portfolios may differ significantly from the benchmark.


Macroeconomic Outlook

Drawing on internally generated fundamental data and select external resources, the Investment Committee formulates a macroeconomic and capital market outlook. This outlook is articulated internally as a base case, a high case, and a downside case, and updated at least quarterly. The macro overlay provides a context for the analysts’ research efforts and helps direct them to the industries and companies most aligned with the committee’s current outlook. The analysts present specific buy and sell recommendations to the Investment Committee, which makes the final decision concerning which securities should be included in the model portfolio and their recommended weightings.


In summary, approximately 80% of Fayez Sarofim & Co.’s investment process focuses on industry-specific and company-specific fundamental research while the remaining efforts, approximately 20%, are devoted to developing a macroeconomic context for this in-house, fundamental analysis.


Proven Investment Strategies

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