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 Investment
Philosophy
Earnings growth drives stock prices
over time. The National City Investment Management Company mid-capitalization
growth equity investment team believes that superior returns are achieved
by selecting stocks with above average, improving earnings growth rates
at attractive valuations. This philosophy is approached with an active,
rigorous, and disciplined process. The Investment Management Company's
bottom-up investment process is focused on the earnings growth, profitability,
risk/return, and valuation parameters of securities with a minimum market
capitalization of $1.0 billion - $15.0 billion.
Investment
Process
The equity purchase investment process begins with the
Baseline universe. Initially, the universe is screened for stock issues
with a market capitalization in excess of $1.0 billion. These remaining
issues are screened for:
| 1 |
Earnings growth
greater than that of the Russell Midcap™ Growth Index on a
three and five year historical basis or on an expected future earnings
growth basis. |
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| 2 |
Revenue growth,
as a validation of stong earnings, in excess of the benchmark comparison
rate. |
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| 3 |
Earnings
growth sustainability and predictability.
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| 4 |
Positive
earnings revisions and surprises.
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| 5 |
Valuation
tests focused on price/earnings, price/sales, price/book value,
and price/cash flow ratios.
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Portfolio
Construction
While the investment process of the National City Investment Management
Company is a bottom-up method, consideration is given to sector weightings.
Specific sector weightings reflect fundamental growth prospects and current
validation. If a sector represents 10% or more of the Russell Midcap™
Growth Index comparison, the normal maximum portfolio allocation will
be the lesser of 2.0X the benchmark's allocation or 50%. The normal minimum
portfolio allocation will be 0.5X. If the index sector weighting is 10%
or less, the normal maximum portfolio sector allocation will be index
sector weighting plus 10% with a minimum 0% allocation. Individual issues
are limited to 3% to total asset at time of purchase. The portfolio will
normally hold 75 - 110 securities, with a 5% maximum cash limitation.
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Not to be reproduced or shown publicly.
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