The investment philosophy employed at Burk, Hall & Co. is partially founded on the principles of Modern Portfolio Theory (MPT). The core thesis of MPT is capital markets will perform at different rates at different times. With this thesis, it is critical an investment portfolio be diversified among different asset classes to reduce risk. The term for this diversification process is called asset allocation. Another key principle of MPT requires the rebalancing of portfolios at set intervals of time. With this approach, the strongest asset classes are sold and reinvested in the weakest asset classes with the belief that one day they will become strong again.
While asset allocation and rebalancing are strategies used to manage risk, at Burk, Hall, & Co. we feel these strategies alone fall short in risk mitigation. Our investment philosophy adds a layer of tactical asset management by utilizing a technical discipline derived from Relative Strength and Point and Figure Charting. We believe these tools over time help us identify some of the strongest markets, asset classes, and sectors within capital markets. When these strong asset classes and sectors no longer maintain that level of recognition, our portfolio rebalancing occurs. This can occur by an asset weakening or a peer asserting itself as a new leader. This approach also recognizes an asset class or sector can remain strong and outperform their peers for extended periods of time. Our strategy seeks to overweight asset classes and sectors which are identified as outperforming based on these tools.
While we believe risk in a portfolio can be reduced by employing diversification, we firmly believe employing sound technical analysis, along with prudent asset allocation and good fundamental research, will generate outperformance and risk reduction over time.
Asset allocation and diversification are investment methods used to help manage risk. They do not guarantee investment returns or eliminate risk of loss including in a declining market.