Horizon Investment Services


Risk Control
  1. Diversification across stocks. We tend to approximately “equal weight” positions in portfolios. Thus, we do not concentrate our investments in just a few stocks. However, we do not constantly rebalance back to equally weighted positions; we will let our winners run, for example. We typically trim individual stock positions if they exceed 5% of the portfolio.

  2. While we do not weight our sector exposure equally with a benchmark, we do try to make sure that we do not have big, oversized bets in any one sector. Typically our maximum sector exposure is 40% of a particular portfolio strategy.

  3. The constant competition to be invested in what we believe are our very best ideas provides an important discipline when it comes to controlling risk. Thus, we may sell a perfectly good stock simply because we have found what we believe is a better stock and do not want to increase our number of holdings.

  4. Our quantitative stock-rating system (Quadrix®) is not only used to pick stocks, but also is indispensable as a tool for ongoing monitoring of portfolio holdings. We are constantly getting important quantitative feedback about our stocks via their Quadrix scores (we update Quadrix weekly). Thus, we have a quantitative, definitive way to see when a stock may be on the decline and may be suitable for a sale (i.e., deteriorating Quadrix scores, etc.)

  5. Tactical investing. We are not afraid to hold cash in portfolios if we believe macro market conditions warrant playing defense or we are not seeing attractive opportunities in the market. Our main indicator for determining the market’s primary trend is the Dow Theory, a tool Horizon Investment Services has been using since inception and our affiliates have been using for more than 70 years.