INVESTMENT CONSULTING SERVICES
“My advice to investors (who cannot give full time to a study of investments) is to seek
out some trusted investment counselor. The emergence of this new profession of
disinterested investment analysts, who have no allegiances and whose only job is to
judge a security on its merits, is one of the most constructive and healthy developments
of the last half century.”
IQ Trends Private Client Asset Management (Private Client) is a California corporation
registered as an Investment Advisor with the U.S. Securities and Exchange Commission
pursuant to the provisions of the Investment Advisers Act of 1940.
This document is a summary of Form ADV Part II, and details the services offered, to
whom these services are offered, and the fees and expenses associated with those
services. Also attached is an Investment Consulting Agreement which details the
responsibilities of the parties to the agreement, and, how Private Client will conduct the
activities for which it is being retained.
INVESTMENT PHILOSOPHY AND METHODS
Private Client serves an international base of clients that includes Foundations and
Endowments, Pension and Benefit Plans, Trusts, and high-net-worth individuals. Private
Client provides both constantly supervised discretionary investment management and
non-discretionary investment consulting based on the investment philosophy and
methods developed by Geraldine Weiss.
Our investment consulting philosophy at Private Client is to personalize the concepts in
Investment Quality Trends.
Since our inception, we have been devoted to a specific concept of identifying basic
investment value. The dictionary tells us that value is “proper price; the quantity of
money which an article is likely to command in the long run, as distinct from its price in
an individual instance.”
This wisdom often escapes investors in relating their holdings to price. In fact, the very
essence of successful investing involves an identification of value, the most fundamental
representation of which is the receipt of dividends.
In general, our philosophy is to recommend the purchase and liquidation of securities
according to historic dividend yields of Undervalue and Overvalue. Based on an original
concept of Value-identification, investment recommendations are confined to only the
highest quality stocks. These stocks offer a wide selection… from low-yield rapid
growth to high-yield, income type securities. These quality stocks best lend themselves to
interpretation of Undervalue and Overvalue limits, to afford us the greatest opportunities
for profitable and intelligent investment consulting and advice.
The Concept is keyed to the basic fundamental of getting a return on the investment
dollar. In practice, it reduces much of the mystery and anxiety which so often
accompanies stock market investing. As an aid in the timing of purchases and sales, the
Concept helps us to help our clients build capital and income.
The Concept can be demonstrated in stock after stock that when all other factors which
rate analytical consideration have been digested, the underlying value of dividends,
which determine yield, will in the long run determine price. The key to value, therefore,
lies in yield as reflected by the dividend trend.
It has been observed that dividend-paying stocks repeatedly fluctuate in price between
generally specific high and low levels of yield. These high and low yield limits form a
step-up channel which can be identified and charted. Each dividend increase steps up the
price of both the high and low yield levels. Each stock has its own individual limits of
Undervalue and Overvalue, determined by dividend yield.
“Values, when applied to stocks, are determined, in the end, by the return to the
investor, and nothing is more certain than that the investor established the price of
stocks.” --- Charles Dow
When the price of a security is at or near the bottom of the channel, the yield is high.
Historically, this is the Undervalued price area. It represents basic investment value.
When the price rises to the upper channel line, producing low yield, the stock has reached
the area of Overvalue. The price likely will reverse from the upper channel line and
return to the lower channel line unless the dividend is increased. A dividend increase
will raise the price level of the Overvalue yield limits. This allows for more price rise
potential to the new level of Undervalue and Overvalue. Thus, it is possible to identify
reasonable levels of Undervalue and Overvalue.
The prices designating Undervalue and Overvalue levels are neither exact nor inviolate.
These prices reflect the historic repetitive limits of high yield at depressed Undervalue
levels and low yield at inflated Overvalue levels. Actually, the specific prices mark areas
of extremes in yield which Private Client uses to assist in identifying degrees of value.
There are many times when prices violate the price limits by a few points. There are also
times when a stock will move an extraordinary distance beyond the confines of
Undervalue and Overvalue. Nothing restricts price movement within precise frontiers, as
all investors know. There are logical and psychological factors which motivate investors
to buy and sell in sufficient numbers to move prices, sometimes to extremes. However, in
the vast majority of instances, Overvalue and Undervalue designations come within 10%
of the high or low in a major price move. Therefore, Private Client has determined that
prices are Undervalued or Overvalued when they are within a 10% range of their historic
levels of high or low dividend yield.
Capital shrinkage normally is minimized at Undervalue because a price decline usually
stops where a distinctively historic and repetitive high yield is generated. A decline in
stock prices reflects the pressures of low yield and overrated earning prospects. Suddenly,
almost, value becomes the watchword. Ultimately, stock value most surely is determined
by adequate dividend yield.
It is important to recognize the potential downside risk which exists at the Overvalue
level. Unless dividends are raised, it may be anticipated that overpriced stocks will
decline toward Undervalue. Selling at Overvalue levels, therefore, in most cases will
preserve profits and capital.
For the reasons above, investment recommendations are based on specific values for each
individual stock as each stock has its own level of unusually low yield. Each stock has its
own “personality” of Value, subsequently there is no one yield pattern applicable to every
stock. Accordingly, Private Client judges, studies and evaluates each stock in our
universe on its own merits and history.
In the process of distilling pertinent facts and figures, Private Client reviewed every type
of investment security. Research proved that high quality stocks provide the best vehicles
for our clients that desire Growth of Capital and Growth of Income. These stocks
consistently command investment support and sponsorship from powerful money forces.
The companies behind these stocks seem to resist adversity best. In good times they
usually outrun both the economy and their lesser competitors. The range of price
fluctuation between Undervalue and Overvalue offers considerable price appreciation
potentials. As it would take rugged economic conditions to halt or lower dividend
increases among the Select Blue Chips, these stocks provide extremely valid
interpretations of Undervalue and Overvalue according to our dividend-yield concept.
Again and again the evidence shows…….. There is no profitable substitute for
Investment Quality Trends has established rigorous standards for its Select Blue Chip
list of stocks. Accordingly Private Client has adopted these standards for determining
securities worthy of consideration in clients’ portfolios. The qualifications weigh: lengthy
profitable progress, growth of income and capital, professional management interest,
marketability and Standard & Poor’s widely accepted long term earnings-dividend
formula ranking. These are the components of blue chip quality. A past history of
earnings, dividends, growth rates, institutional interest, financial strength, research and
development, plus an appraisal of the future all bear on the valuation results.
From our perspective a stock will rate the designation of Select Blue Chip when it meets
our Criteria for Select Blue Chips, found at the top of page two of each issue of
Investment Quality Trends. The criterions are as follows:
1. Dividend increases five times in the last twelve years
2. S&P Earnings and Dividend Quality ranking of “A.”
3. At least 5,000,000 shares outstanding
4. At least 80 institutional investors
5. At least 25 years of uninterrupted dividends
6. Earnings improved in at least 7 of the last 12 years
In summary Private Client recommends a diversified portfolio of Select Blue Chip
securities selected from Investment Quality Trends., Our investment consulting
objectives are in order of importance: avoid real capital loss, realize a tangible return on
investment via dividends, and capture long-term capital appreciation.
Upon engagement we will conduct a data gathering session to assess the needs and
objectives of the consulting client. After the initial assessment we will review the existing
portfolio in light of the needs and objectives detailed in the data gathering session and
will make specific security recommendations. From an allocation perspective it is our
goal for client’s to be fully invested in Select Blue Chip securities at all times. From a
tactical perspective we may, during times of extreme valuations, exceptionally low credit
quality, or excessive volatility, recommend deferring security purchases and utilize cash
alternatives and short-term fixed income instruments in an abundance of caution to both
protect the portfolio capital and to keep it productive.
Under normal market conditions security recommendations will be made from the
Undervalue level. On occasion, based on our experience, a security may be recommended
from the Rising or Declining Trend levels. Liquidation recommendations will be made
upon reaching the Overvalue level. Recommendations for the proceeds from liquidated
positions will be made in securities which represent current historic value.
As a matter of investment policy Private Client prefers not to utilize margin, short sales
The minimum fee for investment consulting is $1,500 per year or .35% of the assets
under consulting, whichever is greater.
The fee is billed one-half, semi-annually in advance.
For complex situations and asset values in excess of $10,000,000 Private Client will
negotiate a mutually acceptable fee arrangement.
For further explanation please see our Investment Consulting Services Agreement.
REVIEWS AND REPORTS
Private Client prefers email to disseminate purchase and liquidation recommendations
after the initial recommendations have been executed. Should client’s situation change or
unexpected events necessitate more extensive dialog telephone consultations may be
PARTICIPATION or INTEREST in CLIENT TRANSACTIONS
Prudence dictates that Private Client invests any capital reserves or excess earnings as
they become available. As Private Client is in the business of identifying securities for
investment purposes, we would be remiss in not utilizing this information for our own
capital. We stipulate that on the surface a conflict of interest would appear to exist,
however, we receive no special pricing or services for the management of our own capital
and do not solicit or accept offers for services not available to any of our clients.
INVESTMENT AND BROKERAGE DISCRETION
Private Client will not exercise any discretion as to the Custodian, Brokers or Dealers and
is not responsible for executing investment recommendations.
Private Client is not a Custodian and will not take delivery of cash or securities for the
benefit of the account holder. It is the responsibility of the account holder to designate a
Custodian to hold and report on the activity within the portfolio(s). Upon request Private
Client will recommend a Custodian. For ease of use Private Client prefers Charles
Schwab and Company’s Institutional Service for Registered Investment Advisors due
strictly to its systems. Private Client receives no economic benefit from Schwab for using