Our Investment Strategy

EQUITY INVESTMENT PHILOSOPHY - Investment Methodology & Philosophy: Palisades’ Small Cap investment philosophy both transcends and eschews the traditional growth versus value framework of investment style superiority. Palisades’ research has shown that companies with positive business momentum, rising earnings estimates, low debt balance sheets, and positive financial statement dynamics will outperform their peers over time, regardless of their affiliation with value or growth. Indeed, the Palisades portfolio has outperformed the Russell 2000 benchmark when value has been in favor, and it has outperformed the Russell 2000 index when growth has been in favor. This unique philosophy of investing differentiates Palisades and is the single biggest reason for the critical success of the Palisades Small Cap strategies. Buy and Sell Disciplines: The main premise of the Palisades investment philosophy is that companies with positive business momentum will outperform over time; that positive business momentum itself is signaled by positive earnings revisions, positive financial statement dynamics and positive, high quality, low-debt balance sheets. The Palisades buy discipline is to identify and invest in companies with these characteristics. In contrast, and with respect to the sell discipline, Palisades sells companies that have negative business momentum, negative earnings revisions or negative and deteriorating balance sheets. In summary, Palisades buys companies with positive business momentum and sells or avoids companies with negative business momentum. Importantly, Palisades uses proprietary techniques, including forensic accounting techniques to define and identify positive and negative business momentum. The Palisades Small Cap strategy was launched in 2011 and obtained its first outside client in 2014.

INVESTMENT DECISION-MAKING PROCESS - The investment process begins when Palisades uses its proprietary screens to identify and download the most attractive companies below $5 billion and above $100 million in market capitalization. In the second step of the process, Palisades identifies the most attractive stocks and scrutinizes those names more closely. In a typical month, Palisades may select 10 names to examine. Palisades then downloads 10 years worth of financial statements, valuation, financial ratios, and other fundamental data on the companies under examination. In the third step, Palisades analyzes the financial statements through an intensive focus on the companies' income statements, balance sheets, and cash flow statements. By focusing on the data provided in the balance sheet, Palisades is able to detect key inflection points earlier than many other investment managers, particularly those who rely mainly on data supplied in the income statement. In the final step of the investment process,  Palisades selects the most attractive stocks to purchase across all of their client portfolios. This process is repeated on a daily basis.

PORTFOLIO CONSTRUCTION - The portfolio manager is responsible and accountable for the investment process involving stock selection, monitoring current holdings, portfolio construction, portfolio characteristics, risk controls, and screening for new ideas. The portfolio construction process is disciplined and consistent, with an investment methodology rooted in bottom up, proprietary fundamental research. The investment process does not involve making strategic allocations to specific sectors or industries. Internal guidelines are used to measure and control risk in the portfolios. The portfolio is constructed to prevent any one idea from torpedoing performance. The combination of these two factors in aggregate has helped the portfolios perform well since inception.

ESG INTEGRATION - ESG considerations have been a part of the investment process since inception. Palisades portfolios are fossil fuel-free, firearm-free, and private prison-free.

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