Hughes Investment
Management
 |
 Private
Account Management |
| An
Individualized Approach to Your Portfolio |
| The
Highest Level of Attention |
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Call Doug Hughes
1-888-814-7575
Performance: we are
the top performing money manager in our respective peer group as
rated by Nelson!
Do you want the opportunity to have a direct impact
on
what stocks we buy and sell in your portfolio? If the answer is
yes, then private account ma
nagement may be your best way to benefit
from
the expertise of Hughes Investment Management.
With our Private
Account Management Service, your individual investment picture
is reviewed
in detail by Douglas Hughes. After consultations that help to
identify specified goals for your portfolio, an account is set up
in your
name at Tucker Anthony & Co. or a firm of your choice. We are
signed onto the account as your adviser and are authorized to make
buy and sell decisions. You receive, from Tucker, immediate confirmations
on all trades and regular monthly statements.
You continue to have
direct one-on-one access to Douglas Hughes, who is generally
available to answer and handle any questions you may have.
Maximum
flexibility.
Maximum personalization. Maximum support from our staff. To open
an account, a balance of $100,000 is required. This can consist
of several individual accounts such as your IRA, your spouse's
IRA,
and a joint account.
To determine if Private Account Management is right for you, answer these questions:
1. Are you managing
substantial sums of money?
2. Do you need a high degree of personalization
and
customization in your portfolio?
3. Do you like close contact
with
all activity in your portfolio?
4. Do you like to
see every
trade confirmation for every change?
5. Do you have tax management
concerns?
6. Are you trying to invest in only one or two specific
sectors?
How Do We Work?
In-House Research
Hughes Management is a research-oriented
investment
firm. As such, the Manager intends to invest only in those
companies of which it has in-depth knowledge. This includes a thorough
understanding of
a company’s business lines, its future
earnings prospects, management, liquidation value, and its plans
for growing
its deposit
base. Book value many times is understated, not reflecting
the true value of all company assets. Even if all of the Manager’s
requirements for investment are met from a purely financial
perspective, the Manager
does not invest in companies whose management is not capable,
reliable, knowledgeable, and shareholder-oriented.
By concentrating
on a
small number (30-50 stocks) of particularly attractive investment
opportunities
at any one time, the Manager believes that it can provide
much higher returns than would be provided in most other investment
vehicles,
and it believes that it can do so with a relatively low risk
of permanent loss of capital.
The Manager’s approach to
valuing stocks is no different than that which should be applied
in valuing
a whole
company. The Manager will search for companies it believes are
undervalued and will be conservative in future assumptions, in
order to minimize
the potential for permanent loss of capital.
Once the security
approaches what the Manager believes to be its fair value,
the Manager will
consider selling all or part of the position and reinvesting
the proceeds in another company that it feels is undervalued.
The Manager
does not intend to employ technical analy
sis, nor does it
intend to use a "momentum" style of investing, under which
a stock would be purchased, or sold short, just because of recent
price trends.
Realizing that there are better times to purchase stocks than
others,
the Manager will always take into account current overall economic
and market conditions. However, the Manager strongly believes
that for long-term investors, the greatest returns can be generated
from a strategy that involves buying a good business at a large
discount
to the present value.
Hughes Management will generally be invested
in equity securities of smaller companies that are not widely
followed
by the major investment banking firms. The Manager believes
that by spending time and effort, first, to find a
nd analyze the
fundamentals
of promising companies and, second, to understand the market
in which the company operates, it will be able to generate
returns well in
excess of those found in the market as a whole or in the
overall banking industry.
 Back
to How We Work
The Investment Focus
Typically the Manager
will
focus on banks and bank holding companies that are showing
above-average earnings growth and returns on equity. These banks
typically
focus
on lending to small businesses in a local market. Since
these smaller community banks are often focused on a limited ge
ographic
area,
they are able to provide much better continuity and personalization
of
service than can a large regional bank. Knowing the local
business and community leaders on a personal level often allows
these
banks to receive rates of interest that are in excess of
those
offered
by competitors, while at the same time having a more stable
base of customers.
Another benefit of investing in smaller community
banks is that the management often has a meaningful stake
in
the company.
This tends to create an incentive for performance that
benefits all shareholders. It also has the benefit of making management
more amenable
to takeover offers for the company, since management will
see the value of its personal holdings increase tremendously in
a
short
period of time if the company is acquired at a substantial
premium.
Back
to How Do We Work
The
Banking
Industry - General
The banking industry contains over 10,000
individual companies. Hughes Management feels that the
sheer size of the industry
provides astute investors with a nearly constant flow of
investment opportunities. Bankers today have suffered through a
number of
different crises, and many have emerged from the experience
with a determination
to ensure that the problems of the past are not repeated.
Technology has allowed some banks to track the profitability of
each individual
business or product -- not a simple task, given the interconnectedness
of many of a bank’s business lines. Banks are also focusing
on the profitability of in
dividual customers. This newfound ability
to track the profitability of a bank has two benefits. First,
it allows a bank to concentrate its resources in its most profitable
business lines, and, second, it allows unprofitable and under-managed
banks to realize that the best option for them may be to sell
the
institution.
Back
to How Do We Work
Mergers And Acquisitions
Most of the large super-regional banks
that have
emerged in the past few years are focused on the large
commercial
market for bus
iness banking and on capturing the deposits
of large depositors in retail banking. Most are attempting to increase
their
fee income sources through the sale of investments products,
insurance products, trading, and asset management. Many
of the
largest banks
are also entering the investment banking business. For
many, this diversification is in response to a deterioration in their
core
lending business. As they become so large that they dominate
their market
areas, it becomes harder and harder to grow loans at a
pace that
exceeds the growth of the economy in which they operate.
At the same time, many of the smallest banks have been able to
grow rapidly. Acquisitions have created many disaffected customers
who are unhappy
with the service they are receiving from the new mega-banks.
Often a corporate customer will find itself without a personal
account
manager, or will find that the local person has no lending
authority
without prior approval from a far-removed main office.
It is these customers -- those that value good local service and
are
willing
to pay a higher interest rate to receive it -- who are
creating the
opportunity for the small banks in the era of consolidation.
The small pieces of lending business that break off when
a mega-bank acquires a high service small bank are often large
enough to
sustain
double-digit loan growth at capable neighboring small
banks for a number of years. The Manager intends to se
ek out those
small
banks
that will benefit the most from the ongoing consolidation
of
the banking industry by producing strong, consistent
growth.
Hughes
Management believes that investing in stocks purely on
takeover speculation
is not advisable. Instead, the Manager will attempt to
benefit from future mergers in two ways. First, through investment
in
those companies
thought to be likely beneficiaries of mergers within
their market areas (as discussed above) and, second, through careful
selection
of companies that are undervalued based on their fundamentals
and that are also ripe for a takeover. While there can
be no assurance that the Manager
will be able to successfully identify future takeover
targets that meet
its strict criteria for limited risk of permanent loss
of capital, the Manager believes that his portfolios will benefit
from the
further consolidation of the banking industry.
Ba
ck
to How Do We Work
Portfolio Structure
The portfolios
will, on average, have 10-50 issues in them, depending
on the size of the assets. As a result, there is risk that an adverse
event
affecting a single company could result in significant
losses
to the portfolio’s
value. In addition, some of these companies’ stocks may
have relatively low trading volume. This illiquidity may increase
the
risk of loss if circumstances dictate the necessity of liquidating
these positions.
Back
to How Do We Work
Brokerage Practices
Portfolio transactions will
be allocated to brokers on the basis of best execution,
special execution capabilities, block trading, efficiency and error
resolution,
availability
of stocks to borrow for short trades, record keeping
and similar services, as well as commissions charged.
Back
to How Do We Work
Net Asset Value
In
connection with the determination of the net asset
value of the portfolio,
securities shall be valued as follows.
1. Listed portfolio
securities are valued
at the last reported sales price on the date of determination
on the composite tape or on the principal exchange
on which such securities
are traded or, if not available, at the exchange
mean price.
2. Over-the-counter securities are valued at the last
reported
sales
price
on the date of determination if available through the
facilities
of a recognized inter-dealer quotation system (NASDAQ).
If the last reported sales price is not readily available, over-the-counter
securities
are valued at the mean between the closing "bid" and "asked" prices
on the date of determination.
Back
to How Do We Work
Portfolio Turnover
The
portfolio annual turnover rate may vary, depending
on market conditions,
and at times
the portfolio may engage in short-term trading.
However, most investing is done for the long term. A high
rate of portfolio
turnover involves
correspondingly greater expenses than a lower rate.
Douglas Hughes, the portfolio Manager, will have
direct and primary responsibility
for all investment decisions.
Back
to How Do We Work
Please
feel free to contact us with any questions you may have.
Hughes Investment Management
PO BOX 335 Hunter, NY 12442
1-888-814-7575
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As always, you may
call Douglas Hughes with any questions on any stock. This is a
free service to our subscribers.
To contact Douglas Hughes via email - dhughes33@charter.net
Personal Account Management: Bank Stock Portfolios.1.25%-1.75% FEE.
$100,000 Minimum. Douglas Hughes Hughes Investment Management, a
Registered Investment Adviser 1-888-814-7575.
The Small Bank Newsletter is published 12 times a year. (To
Subscribe: 1-888-814-7575).
Douglas Hughes -- Small Bank Newsletter, Hughes Investment Management,
can and does take positions, in stocks it recommends.All material
Copyright© 1995-2007
by Douglas Hughes. Reproduction of this
publication in whole or in part is strictly forbidden.
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