INTERNATIONAL EQUITY PHILOSOPHYOur objective is to provide long-term growth of capital by investing in a diversified portfolio of international equity securities and exchange traded funds whose issuers are considered to have strong earnings momentum. We focus on companies that have experienced above-average, long-term growth in earnings and have strong prospects for future growth.
International securities, when added to a portfolio, may actually help lower the portfolio’s overall risk in two ways:
▪ Through diversification
▪ Through low price correlation to U.S. stock price movements
They may also help to enhance performance, due to the potential growth in foreign countries/companies that is greater than that of the U.S. and its firms. With these potential rewards, there are also additional risks, such as political intervention, foreign capital controls and adverse currency movement.
We take a bottom-up approach toward selection of international equities based on a broad universe of non-U.S. companies from both developed and emerging markets.
We believe in two key aspects with respect to international equities:
1. Location, Location, Location
Individual country characteristics such as culture, government regulation, fiscal and monetary policy, politics and local trading affect stock markets and provide opportunities to add value through country selection. Geographic allocation decisions are based on:
▪ Forecast Price/Earnings Ratios
▪ Economic Imbalances
▪ Relative Financial Strength
▪ Risk Control Parameters
2. Dynamic Investment Strategy
Commons Capital Advisors investment process allows flexibility to move between value and growth styles to capitalize on opportunities, depending on market conditions. Stock selection decisions reflect competitive positions and valuation parameters based on five factors:
▪ Earnings and Revenue Growth vs. Peers
▪ Operating Profit Margins vs. Peers
▪ Strong Cash Flow Generation
▪ Positive Money Flow Patterns
▪ Large Market Capitalization
Diversification does not guarantee against loss. It is a method used to help manage investment risk. There are risks involved with investing, including loss of principal. Investments in securities of non-U.S. issuers and foreign currencies involve risks different from those of U.S. issuers. Investments in securities of emerging countries involves potential risks relating to political and economic uncertainties. Under certain market conditions, these securities could be considered less liquid. Investors will directly bear the expenses of the ETF’s underlying investments. The underlying investments may involve heightened risks related to liquidity, increased volatility and unfavorable fluctuations in currency values. The underlying international and real estate investments may also be subject to economic or political instability in the U.S. and other countries, credit risk and interest rate fluctuations.