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From the African savanna to the
Arctic Circle, following the herd is considered
a good idea. But the survival strategy
of wildebeest and caribou doesn’t always
work for investors.
An estimated 70 percent of money
managers regularly underperform the
S&P 500. And the financial industry’s
“herd mentality” is largely to blame,
according to Managing Directors H.K.
Hallett and Alex Miles of WealthTrust
Advisors LLC, an SEC registered investment
advisor in Charlotte, North Carolina.
Combining a far-sighted perspective
with thorough research and a keen eye
for value opportunities, Hallett and Miles
have outperformed the S&P 500 over the
past three years.
“We don’t subscribe to the usual
benchmarking and indexing approaches
of many money managers or asset
allocators who farm out money for others
to manage,” Miles says. “Our philosophy
is driven by a combination of thematic, top-down perspectives
and fundamental,
bottom-up analysis.
Just because the S&P
500 is weighted 25
percent financial-sector
stocks and 3 percent
utilities doesn’t mean
that is how we are
going to see the
market , ” says the
portfolio manager.
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Adds Hallett, “Our
value - opportunity
strategy targets stocks
and other catalystdriven
investments that
we believe are positioned
to appreciate
faster than the market
overall without taking
excess risk. We build our strategies
based on where we see opportunities
from an absolute return point of view.”
The firm works
primarily with
wealthy families
and foundations
and has seen itsreferrals from regional banks and brokerages
looking to tap into their expertise
increase over the past year. Marketing
Director William Grasty says, “We seek
to add incremental value for our clients
by providing a thoughtful investment
approach while offering a high level of
service and transparency.” |
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Top-Down and Bottom-Up
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Favoring global, long-term investment strategies, Miles
and Hallett also focus on worldwide trends and how they are
likely to affect particular sectors in the future. Important
macro-economic factors such as the leveraging of water and
other sustainability themes such as climate change, renewable
energy and clean technology are included in their approach.
“We believe water is going to be increasingly important in
the coming years,” Miles says. “It is a fundamental, irreplaceable
resource, and demand is rising globally. The current water
infrastructure, including both purification and transportation, is
not sufficient to meet demand and is going to require upwards
of $1 trillion in capital investments, according to the EPA. Other
regions of the world will require major investment as well. Thus,
we have fashioned what we consider a unique water-focused
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strategy, leveraging the resource’s interconnectivity with the
industrial, agricultural and energy sectors to complement our
broader, value-oriented investment approach.” Analyst Brian
Smyth notes, “Anything that enhances efficiencies and helps
manage costs for the industrial and energy sectors will be in high
demand over the coming years in the face of tighter oil supply.”
In addition to pursuing what Miles describes as “gravitational
themes,” Hallett says, “We look for undervalued
companies and interesting perspectives that sometimes
go against the Wall Street consensus.”
Whether opportunities arise from the ashes of the current
housing market, an aging population in need of healthcare or
emerging consumers pursuing western-style consumerism,
the key is finding what others are overlooking. |
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This information expressed above represent opinions of WealthTrust Advisors Charlotte office and are subject
to change from time to time and do not constitute a recommendation to purchase and sale any security nor to
engage in any particular investment strategy. The information contained herein has been obtained from sources
believed to be reliable but cannot be guaranteed for accuracy. |
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December 2007
By Frank Maley
Professional pickers grapple with a volatile market to pin down high-flying stocks for the coming year.
Timing is everything when you’re buying and selling stocks. And autumn 2006, it turns out, was a bad time to fall in love with financial companies — at least it was for those who participate in Business North Carolina’s annual stock-picking contest. A subsequent slump in the housing market and concerns about loan losses, among other things, punished financial stocks this summer and into the fall. One of last year’s selections, mortgage insurer Triad Guaranty, lost more than 80% of its value during the 52 weeks that ended Oct. 26, plunging from more than $50 a share to less than $10. Three of the panel’s four worst-performing picks came from the financial sector. |
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 Contestants who steered clear did better. Alex Miles, managing director of the Charlotte office of Nashville, Tenn.-based WealthTrust Advisors, posted the best three-stock average total return. A big gain by the young drug company Targacept made up for a less-spectacular increase by Progress Energy and a loss by yellow-pages publisher R.H. Donnelley.
Savvy investors will often buy a stock when it’s down, but several of our panelists say they expect continued problems for financial stocks, so this year they lean more toward the tangible — rocks, steel, cigarettes — though drug research and energy management also got nods. Some of our pros expect individual stocks to rebound from bad years, but the overall outlook for 2008 isn’t pretty. Some panelists think the country is heading for recession. Alex Miles thinks it’s already there. On the fourth day after the contest started, the Dow Jones Industrial Average dropped more than 350 points.
As if our pickers didn’t have enough to worry about, we’ve sicced pro wrestler Ric Flair on them. As you’ll discover in this story, the Nature Boy came to BNC suited-up and settled-down but still ready to rumble.
The self-proclaimed "greatest pro wrestler of the modern era" has swapped hot air with some of the world's best trash talkers, but he can't manufacture any venom for Alexander B. Alex Miles, managing director of the Charlotte office of WealthTrust Advisors Inc. and the reigning champion of BUSINESS NORTH CAROLINA'S
annual stock-picking contest.
Alexander B. Alex Miles
Managing Director
WealthTrust Advisors LLC Charlotte, NC
Martin Marietta Materials Inc.
Martin Marietta is a leading producer of construction aggregates and magnesia-based chemical products. It will benefit from the “think globally, act locally” mantra. Barriers to entry are significant, and the highly fragmented industry is in the midst of a consolidation phase that will provide a stock-price floor for the company while it weathers the residential-construction and credit challenges. Infrastructure spending on roads, ports and airports represent half the company’s revenue. About one-fifth comes from residential construction, which is likely to remain in recession for at least another 12 months.
PowerSecure International Inc.
This is a speculative, early-stage company in an emerging industry. PowerSecure and its peers help utilities and their customers manage peak electricity demand, conserve energy and design infrastructure for transmission and distribution. The company trades at a steep discount to its peers because of its reliance on just one customer — the supermarket chain Publix — for 50% of its 2006 revenue and recent high-cost executive departures. But if PowerSecure can increase strategic and operational transparency while tapping into the fragmented $300 billion electric-utility market, the shares could soar.
RF Micro Devices Inc.
RF Micro designs, manufactures and markets semiconductors, primarily for use in wireless handsets. The stock price has been under pressure for much of 2007 as margins have compressed and revenue from Motorola contracted. But its pending acquisition of Sirenza Micro Devices and uncertainty at competitor Freescale Semiconductor, provide opportunities for revenue diversification and market-share growth.
 Wrestler holds his tongue
Ric Flair shows no emotion as he eyes his opponent's picture. Seconds pass, and the words just won't come. The self-proclaimed "greatest pro wrestler of the modern era" has swapped hot air with some of the world's best trash talkers, but he can't manufacture any venom for Alexander B. Alex Miles, managing director of the Charlotte office of WealthTrust Advisors Inc. and the reigning champion of BUSINESS NORTH CAROLINA'S annual stock-picking contest. Flair says he's learned over the years not to say unkind things about people he doesn't know. "They always take it too personally."
What? Is this the same guy who routinely dismissed muscled-up challengers with his trademark line: "To be the man, you've got to beat the man"? Has "the dirtiest player in the game" lost his edge? Is it because the TV cameras aren't rolling? Or maybe he's just afraid people will find out he doesn't know Wall Street from Wal-Mart. "I'm very intimidated," he says finally.
 He's smiling, though. Apparently, a grinning investment adviser
with thinning
hair holds no real terror for a man who has tangled with the likes of Hulk Hogan — a man who, at 58, still mixes it up in the ring with younger men and has, by his estimate, been whacked on the back with a folding chair at least 1,500 times in the past 35 years. Truth is, the Nature Boy can be very different — polite and self-effacing — from his public persona. And besides, he's trying to cultivate a new image. He recently started an Internet business, Charlotte-based Ric Flair Finance LLC, to generate leads for Charlotte-based Huntington Beach, Calif .-based auto lender Triad Financial, so he wants to seem more corporate.
That doesn't mean he plans to go easy on his foes in this year's stock-picking contest. As he explains his selections, it's clear that Flair has done some homework and brought some competitive juice to bear. But he also has a soft spot for businesses he knows well.
One is Lowe's, the Mooresville-based hardware chain. Its share price at the end of October was down about 10% from a year earlier, but Flair is sanguine about its prospects. "Lowe's is in 49 of the 50 states and employs, I think, 210,000-plus people. And home improvement is what America is all about now. I think there are like 13 million people a week who go through Lowe's nationally."
He occasionally is among them, but he admits that his home-improvement projects so far have been limited to changing light bulbs, putting up Christmas lights and, um, planting flowers. Well, he is the Nature Boy.
He also loves stock-car racing, so he picked Speedway Motorsports, the Concord-based — for now, at least — racetrack owner. Its shares also were down a bit from a year earlier, but Flair is confident in the abilities of CEO Bruton Smith. "He doesn't do anything in a small way. I just don't think it's ever going to get smaller. I think it's going to continue to grow."
His third pick strays a little farther from home — Ingles Markets, an Asheville-based grocery
chain. Its stock surged past $40 earlier this year, but it ended the 52-week period where it began — about $28. After rattling off some stats, Flair gets to the heart of the matter. "They really appeal to the smaller towns. They're more accessible to people."
What about competition from Wal-Mart? "Wal-Mart is the monster. Ingles has a more personal presence, which means a lot in a small town. She and I, we go to two stores."
"He does all the grocery shopping," chimes in his wife and business partner, Tiffany. They own half of Ric Flair Finance. Chris Porter, CEO of Net-One Finance, a Charlotte-based software company, owns the rest.
"We know the people," Flair continues. "We get along with them. I'll drive 20 miles to buy something from somebody I like, as opposed to driving five miles to buy from someone else."
It shouldn't come as a surprise that a man who has been wrestling for 35 years likes to stick with what works. But he knows his ring career can't go on forever. Years of chop blocks, atomic drops and figure-four leg locks — his signature move — have taken a toll. So he's using his fame to move into another line of work. Ric Flair Finance, for example, touts its "Figure 4 Process" for getting a loan: Pick a loan, complete the application, submit the application and get the loan.
And borrowers needn't fear, he insists, that there's a different Figure 4 Process for people who don't pay up. "I think that hangs over their heads," he says with a grin. "But there's nothing in writing."
Disclaimer
Specific companies mentioned were done so for illustrative purpose only. Individual portfolios may vary in their holdings over time and in relation to other portfolios. The opinions expressed are subject to change from time to time and do not constitute a recommendation to purchase or sell any security nor to engage in a particular investment strategy. |
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December 2006
By Maggie Frank
Our panel of professional stock pickers predict which Tar Heel shares will be the top performers next year.
Alexander B. Alex Miles
Managing Director
WealthTrust Advisors LLC Charlotte, NC
Progress Energy Inc.
Progress’ performance has lagged its peer group throughout the past year during a period of company restructuring but offers investors a dividend yield of more than 5%. The company has shifted from a diversified to regulated regional utility with core operations in North Carolina and Florida. With the market having digested the company’s phaseout of synthetic fuels and other business, the shares should benefit from reduced earnings volatility and reflect some expansion to its price-earnings multiple.
R.H. Donnelley Corp.
The company is the third-largest publisher of directories in the United States, with annual revenue of nearly $3 billion. Re- cent weak revenue trends have pushed the shares down for the last year, providing an excellent entry point for a steady cash-flow business trading at a 50% discount to peers. Its ongoing expansion into the online search market provides additional growth potential.
Targacept Inc.
The company is developing a new class of drugs to treat disorders of the central nervous system by targeting receptors in the brain. As an early-stage biotechnology company, it’s risky until the drug pipeline yields marketable products. However, with Targacept’s potentially first-in-class drug for cognitive disorders such as Alzheimer’s disease, an exclusive global licensing and research collaboration agreement with AstraZeneca in place and a strong management team, the company is poised to grow significantly.
Disclaimer
Specific companies mentioned were done so for illustrative purpose only. Individual portfolios may vary in their holdings over time and in relation to other portfolios. The opinions expressed are subject to change from time to time and do not constitute a recommendation to purchase or sell any security nor to engage in a particular investment strategy.
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January 2005
By Frank Maley
Here's how our stock pickers hope to beef up their portfolios in '05.
Alexander B. Alex Miles
Senior Portfolio Manager
WealthTrust Advisors LLC Charlotte
Bank of America Corp.
BofA continues to provide steady price appreciation bolstered by a reliable income stream. At 11 times 2005 earnings estimates, the stock has been trading at a 10% discount to its peer-group multiple of 12.2 times, and BofA is poised for double-digit earnings growth in 2005. The equity markets should reward improvements from the FleetBoston merger as the company shifts cost savings to high-growth businesses. Recent disappointing earnings, resulting from challenging capital-markets and mortgage-banking environments this summer, provide a reasonable entry point for buying this well-diversified bank with one of the highest dividend yields — 4% — in its sector.
Lance Inc.
The Charlotte-based snack maker and distributor is in the midst of a turnaround as the company refines its delivery routes and eliminates unprofitable vending machines. Lance’s private-label business continues to grow as a primary beneficiary of the company’s relationship with Wal-Mart. Although there are margin and revenue risks associated with higher commodity prices and Lance’s dependence on one major customer for nonbranded sales, the firm should see additional growth in its Lance and Cape Cod brands, while also generating positive cash flow and continuing to pay down debt. Lance’s outsized 4% dividend yield remains secure.
TriPath Imaging Inc.
TriPath Imaging, which has its headquarters in Burlington, develops solutions leading to the early detection and clinical manage-ment of cancer, including detection, diagnosis, staging and treatment. All the firm’s revenue is generated through its cervical-cancer-screening products, which maintain a 10% to 15% share of the domestic Pap smear market. TriPath supplies the three largest commercial diagnostic-lab-operating companies in the country. For investors willing to assume more speculative risk, TriPath offers compelling upside growth poten- tial as current and future revenue-gen- erating products navigate the U.S. Food and Drug Administration’s regulatory approval process.
Disclaimer
Specific companies mentioned were done so for illustrative purpose only. Individual portfolios may vary in their holdings over time and in relation to other portfolios. The opinions expressed are subject to change from time to time and do not constitute a recommendation to purchase or sell any security nor to engage in a particular investment strategy. |
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