Hemispheres Investment Management
A Values-Based Approach to Your Wealth
At Hemispheres, wealth management is more than just managing assets—it’s about developing a multi-faceted plan that aligns your financial strategies with your personal values, goals and future security. Our Domestic-Plus Equities Strategy combines broad market exposure with handpicked, undervalued domestic equities. This strategy targets investors seeking to enhance their portfolio with market diversity and growth potential.
What is the Domestic-Plus Equities Strategy?
The Domestic-Plus Equities Strategy is a carefully curated portfolio that provides investors with broad market exposure through Exchange Traded Funds (ETFs) while also incorporating selected individual equities identified for their strong performance potential. By balancing these components, we aim to offer a strategy that not only captures the overall market return but also capitalizes on specific opportunities within the market.
Key Components of the Domestic-Plus Equities Portfolio
Our strategy focuses on two key components:
The “Core” portion of the strategy:
Exchange Traded Funds (ETFs) that mirror the Russell 3000 Index are utilized providing exposure to a wide range of industries and sectors within the domestic market. The Russell 3000 measures the performance of the largest 3,000 US companies and represents approximately 96% of the investable US equity market. The Russell 3000 index is capital-weighted, so large-cap stocks drive most of its returns.
Sector Composition of the Russell 3000
| Sector | Weighting as of 7/31/2024 |
|---|---|
| Technology | 33.37 |
| Consumer Discretionary | 13.74 |
| Industrials | 12.85 |
| Health Care | 11.51 |
| Financials | 11.21 |
| Consumer Staples | 4.32 |
| Energy | 3.97 |
| Real Estate | 2.73 |
| Utilities | 2.57 |
| Telecommunications | 1.96 |
| Basic Materials | 1.77 |
The “Plus” portion of the strategy:
Hemispheres is a bottom-up, research driven value manager. We identify and invest in specific equities that are compelling due to their valuation, market position, and the stability of financial fundamentals. The stocks that we choose are all discounted to their intrinsic market value. The discount could be due to a temporary setback at the company, or it could be sector or market/economic cycle related. Hemispheres buys equities expected to outperform the broader market over time as they re-rate to their assessed fair-market-value.
Sector Rotation:
One commonly utilized sector rotation strategy is based upon valuation metrics and is consistent with Hemispheres’ value approach to investing. We often identify quality companies within a specific sector. When value exists in a certain sector, Hemispheres may choose to overweight. We evaluate metrics like price to earnings, price to book value, dividend yield and price to economic value, among others. We use these metrics, along with fundamental analysis, to determine fair market value. As the table shows, the Russell 3000 heavily favors the technology sector due to its large companies. However, significant opportunities exist in other, less-represented sectors that can enhance investor returns.
International equities:
The Russell 3000 excludes international companies. Many international and emerging market domiciled companies trade on U.S. markets in the form of American Depositary Receipts (ADRs). A U.S. bank issues an ADR as a negotiable certificate that trades like common stock and represents shares of a non-U.S. publicly traded company. ADRs are priced in U.S. dollars, and dividends are paid out in U.S. dollars. A custodian bank in the foreign company’s home country holds the actual shares. The Russell 3000 Index generally excludes ADRs. By adding international ADRs, we can add quality companies to the portfolio that provide insulation against an adverse US market event as well as to provide the opportunity to achieve outperformance.
Hemispheres Investment Management
Why Choose Domestic-Plus Equities for Your Investment Portfolio?
Broad Market Exposure: The inclusion of ETFs ensures that your portfolio captures the performance of the overall market.
Strategic Stock Selection: By incorporating selected equities, we aim to outperform the market by focusing on undervalued or high-potential stocks.
Diversification: The mix of ETFs and individual stocks helps in spreading risk across various sectors, reducing the impact of market volatility on your portfolio.
Performance Overview: Domestic-Plus Equities vs. Russell 3000 Index
| Domestic – Plus | Russell 3000 | |
|---|---|---|
| 10/31/2022 – 12/31/2022 | 2.05% | -0.95% |
| 12/31/2022 – 12/31/2023 | 25.90% | 25.92% |
| 12/31/2023 – 06/30/2024 | 7.66% | 13.56% |
Source: PortfolioCenter
Risks and Considerations in Domestic Equities Investing
While the Domestic-Plus Equities Strategy offers compelling opportunities, it is important to understand the associated risks:
Market Volatility: As with any equity investment, market fluctuations can impact the value of your portfolio.
Potential for Loss: The strategy includes equities that may experience significant value changes, and as such, there is the potential for material loss.
No FDIC Insurance: Equity investments are not covered by FDIC insurance and carry inherent risks.
Understanding the Role of ETFs in the Domestic-Plus Strategy
ETFs play a crucial role in the Domestic-Plus Equities Strategy by providing:
- Broad Market Coverage: ETFs offer exposure to 3000 stocks across various sectors, diversifying your portfolio.
- Cost Efficiency: ETFs are typically more cost-effective than individual stock selection, allowing for greater flexibility in portfolio management.
How the Domestic-Plus Strategy Aligns with Your Financial Goals
The Domestic Plus Equities Strategy can be tailored to meet your specific goals, whether you seek growth, income, or capital preservation. By combining broad market exposure with targeted equity selection, this strategy provides a balanced approach that can help you achieve your long-term financial goals. broad market exposure with carefully selected equities that we deem attractive and undervalued. This strategy aims to enhance portfolios with a blend of broad-based market exposure and growth potential for investors.
Take the Next Step with Hemispheres
Your wealth management strategy should be as unique as your financial goals. The Domestic-Plus Equities Strategy offers a robust, diversified approach to domestic equity investing, designed to deliver strong performance while managing risk. Contact Hemispheres today to explore how this strategy can be a part of your comprehensive wealth management plan.
Elevate your financial future with Hemispheres—where strategy meets success.
Need any Help?
Connect with Our Team for Assistance
Michael Hart, CFA
CEO and Director of International Research
Michael Hart has over 30 years of capital market experience. From 2007 to 2013, he worked as a Managing Director at Tradewinds Global Investors, where he was a global equity and emerging market equity portfolio manager and a global securities analyst. Prior to Tradewinds, Michael founded and operated Hemisphere Asset Management from 2000 to 2007; the Firm managed global equity, fixed income, and balanced accounts for individuals and institutions. From 1989 to 2000, he helped manage the investment portfolios of the Farmers Insurance Group of Companies as a Senior Portfolio Manager.
Rebecca Holden, CFA
Director of Domestic Research
Rebecca Holden has over 30 years of capital market experience. From 2003 to 2010, Rebecca was Portfolio Manager and Principal at Archer Capital Management in Los Angeles, California, managing domestic equity portfolios for individual clients. Prior to working at Archer, Rebecca was an equity analyst employed by Lehman Brothers in New York City following electric and gas utilities as well as energy companies. Before relocating to NYC, Rebecca was employed as an Intermediate Portfolio Manager for the Farmers Insurance Group of Companies as one of four corporate portfolio managers.
Rebecca was employed with prominent west coast financial institutions prior to employment on the Farmers accounts. Rebecca held positions as a credit analyst, banker structuring both private and publicly held bond issuances and later manager of one of the largest groups at the bank. In addition to the professional designations held, Rebecca has an MBA from Brigham Young University with a double emphasis in Quantitative Analysis and Finance (Investments).
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