Thank you for
your interest in MCGEHEE CAPITAL MANAGEMENT, INC!
The focus of our stock
selections are based on technical chart readings, fundamental valuations,
cyclical tendencies, and most importantly our proprietary timing tool, "The
McGehee Trend-Turn Indicator."
Stewart B. McGehee, president and
portfolio manager, is frequently quoted in Barron's magazine, Advisors Digest,
The Bull and Bear Report, The Dick Davis Digest and several on-line investment
sites.
Please ckeck out our superior performance record, investment
philosophy and management agreement information.
Feel free to contact us
with any questions or visit the FAQs section by scrolling above.
 | "EQUITY INVESTMENT
PHILOSOPHY "
There are five steps in the highly disciplined stock
selection process at McGehee Capital Management. The first step is the very
unusual, yet highly disciplined "top- down" stock selection process. While the
"top-down" approach goes against the grain of most stock market gurus, McGehee's
extensive research proves that certain stock groups outperform others during
both bull and bear market cycles. Concentrating in these stocks should help
McGehee outperform the market over the long-term.
The second step is to
use the"McGehee Trend-Turn Indicator." This is our proprietary
market-timing tool developed over the last 25 years. While most will tell you it
is impossible to time the market, our indicator has a 90% correlation in calling
market turns of 7% or more.
The third step of due due diligence involves
the analysis of individual stock charts to identify those technically poised to
outperform the market. This technical analysis can help identify either stocks
with a high degree of relative strength or those that are oversold, both basing
for an advance.
The forth step involves fundamantal analysis of companies
chosen in steps one and three. Among the criteria used are: increasing revenues
and earnings per share, improvement in profit margins, reasonable price to
earnings ratio based on expected earnings, and market niche.
The fifth
step involves a stock allocation model allowing McGehee to attempt to produce
balance portfolios with respect to risk. The Agressive Growth Portfolio contains
approximately 20% of its stocks invested in well established
large-capitalization stocks, 50% in moderately established mid-cap stocks with
moderate risk, and 30% in lesser known small-capitalization stocks with a high
risk/reward ratio. In the Growth Portfolio approximately 70% of the stocks will
be invested in established large capitalization less risky stocks and 30% in
moderately established mid-cap stocks with moderate risks. The Conservative
Growth Portfolio will be 100% invested in large-capitalization stocks, as will
the Growth and Income Portfolio along with fixed income instruments. Most of the
portfolio will contain growth stocks, while the rest will be invested in "value"
stocks.
The value of this rigorous five step due diligence has been
extraordinary. Each portfolio contains between 15 and 30 stocks(more for
institutional clients) meeting our criteria. The Growth Portfolio, the
Conservative Portfolio and the Growth and Income Portfolio have low turnover
rates, thus allowing for long-term capital gains. The Aggressive Growth
Portfolio turnover is higher, with some long-term capital gains. Over the
intermediate and long-term our portfolios tend to outperform their
benchmarks.
"FIXED INCOME PHILOSOPHY"
McGehee's fixed
income investment objective is to generate competitive total returns, with an
emphasis on protection of capital. To reach these objectives we include the
following factors in our decision making process: interest rate trends, maturity
structure, and quality. We are more interested in holding issues to maturity,
thus receiving interest payments, than we are in trading issues for capital
appreciation.
The first and most imprtant step in our process is to
forecast the trend in interest rate movements. The trend forecast starts with an
in-depth technical analysis using a broad varity of interest rate charts.
McGehee follows that with fundamental macro-economic analysis, developing a
model for the economic outlook and inflation.
Secondly, a maturity
structure is selected to take advantage of positive interst rate trends or to
protect against negative interest rate trends. There are times when we
concentrate on the highest quality government bonds or short-term instruments
and times when we concentrate on high quality corporate bonds. This depends on
credit spreads and our analysis of macro-economic conditions.
The last
step in our due diligence of selecting individual fixed-income instruments is
the quality rating of the issues. Credit quality ratings are issued and used
from national services such as Standard and Poor's and Moody's. Other research
sources include national broker/dealer on Wall Street, regional brokerage firms
from around the country and numerous trade publications like
Barron's.
"BALANCED PORTFOLIO PHILOSOPHY"
The Balanced
Portfolio mixes both stocks and fixed income instruments. This gives one the
safety and current income of fixed instruments and the long-term appreciation of
stocks necessary to historically beat inflation. By having exposure to two
different asset classes, which often move in oppisite directions, one usually
reduces the volitility associated with just one asset class.
McGehee's
approach to the proper mix between stocks and fixed income for an individual
investor is obtained by using the following formula: 100 minus investor's age
equals assets in stocks. The remainder will be allocated to fixed income. This
enables one to automatically become more conservative with age. For institutions
the ratio will be determined by economic conditions. Of course McGehee is here
to serve the needs of our clients, therefore, we can work with you to customize
your asset mix depending on individual risk tolerance, time horizon, and income
needs, etc.
Finally, we do not necessarly seek capital gains by trading
fixed income instruments. We will however time the market to take advantage of
inefficiences between short-term interest rate trends and long-term rate trends.
Thus tending to invest near the optimum price entry
point.
 | "PORTFOLIO OBJECTIVES,
PERFORMANCE HISTORY and FEE SCHEDULE"
McGehee Capital Management
offers five different portfolios:
1) AGGRESSIVE GROWTH: This
portfolio will be invested in large, medium and small capitalization stocks,
which we view as having above average potential for price appreciation. Few of
the companies pay dividends. The benchmark will be the Nasdaq Index. The
portfolio will be mostly invested in medium capitalization stocks, with some
small and large capitalization stocks mixed in. Some positions will be held for
long-term capital gains. The portfolio will inherently be subject to a high
risk/reward ratio. The portfolio is usually 100% invested in stocks. From time
to time a percentage of the portfolio can be in cash or short the market to
protect against pullbacks. Turnover is high.
Performance record:
+48.8% average annual return over 9
years.
1994...+40% 1995...+192% 1196...+60% 1997...+53% 1998...+76% 1999...+117% 2000...-47% 2001...-35% 2002...-38% 2003...+70%
2)
GROWTH: This portfolio will be invested in large to medium capitalization
stocks, which we view as having above average potential for price appreciation.
Some companies will pay a dividend. The benchmark is the S & P 500 Index.
Most stocks will be held for long-term capital gainsto teke advantage of the
lower tax bracket. The portfolio is usually 100% invested in stocks. From time
to time a small percentage of the portfolio can be in cash or short the market
to protect against pullbacks. Turnover will be low.
Performance record:
+21.2% average annual reurn over the last 9
years.
1994...+10% 1995...+52% 1996...+24% 1997...+53 1998...+49% 1999...+42% 2000...-19% 2001...-23% 2002...-28% 2003...+51%
3)
CONSERVATIVE GROWTH: This portfolio will be similar to the Growth
Portfolio with the following exceptions. More stocks from the "value" universe
of stocks will make up the portfolio. There will be a higher dividend rate on
the overall portfolio.
Performance record: 17.8% average annual return
over the last 9
years.
1994...+10% 1995...+53% 1996...+24% 1997...+48% 1998...+39% 1999...+36% 2000...-20% 2001...-11% 2002...-29% 2003...+28%
4)
GROWTH AND DIVIDEND: This portfolio will be invested in large
capitalization stocks with a concentration in those that might provide growth,
but also pay relatively large dividends. This portfolio was started in 2002 in
response to the low yield on fixed income
instruments.
2002...-8% 2003(thru 11/15/03)...+27.5%
5)
GROWTH AND INCOME: This portfolio will be invested in large
capitalization stocks and fixed income securities. The current return(i.e.
dividends and coupons) will be higher than the above portfolios. The ratio of
stocks to fixed income will vary. For institutions the ratio will be determined
by economic conditions. For individuals the following formula will be used. 110
minus investor's age equals pertcentage of portfolio in stocks. If you prefer a
set percentage in fix income that can be specified.
Performance record
will depend on what percentage of your portfolio is in stocks. The stock
holdings are similar to those held in the Conservative Growth
Portfolio.
6) FIXED INCOME: This portfolio will be invested in
Money Market Funds, US Treasuries, and US Corporate Bonds. The average maturity
of the portfolio holdings will be from short-term to 30
years.
Performance record: There is no performance record as securities
are simiply held to maturity in order to receive current income.
Past
performance does not guarantee future results! Performance figures do not
include management fees, but do include transaction costs. Returns indicated for
McGehee Capital Management were managed exactly the same as The McGehee Report,
until 1997 when they started to be managed separately. Returns for The McGehee
Report are based on the Intramonth Subscription notices. As with most
investments you may lose part or all of you money. Performance figures do not
take into account tax consequences.
FEE
SCHEDULE
Equity Account Total: First
$200,000;..Next $300,000;..Next $4.5 million;..Above $5 million.
Fee
:..............2%...................1.5%
...................1%.........................0.75%
Fixed
Income Account Total: First $5 million;... Over $5 million
Fee:...............0.35% ................0.25%
Minimum Account
Size:
$100,000. _____________________________________________________________
Equity
and Fixed Income Billing:
A quarterly fee is calculated at the rate of ¼
of the above percentages on the total value of a client’s funds as of the last
business day of the month following the date Agreement is entered into. This fee
is deducted from the Client’s account and paid to McGehee Capital Management,
Inc., unless otherwise agreed to in writing. Client will receive a Fee Statement
shortly after the deduction of the fee.
For the period between the date
an Investment Advisory Agreement is entered into and the first quarterly fee
calculation date, an initial fee shall be computed on a pro-rated basis for the
said time period.
In the event that additional funds are placed or
withdrawn under management, the fee for these funds will be computed on a
prorated basis for the time period said funds were under management by the
Investment Advisor.
Past performance does not guarantee future
results! 2004
__________________________________________________________________________________
 | "ORDER
INFORMATION"
If you are interested in our managed accounts,
please contact us for our Brochure(this is required by the SEC).
The
Brochure contains even more information including ADV Form Part II, and
Agreement Form.
The sign-up is simple and we will lead you through the
process. E-mail, call or write Stewart B. McGehee:
E-mail:
stewart@mcgeheereport.com Phone: (501)661-1702 Address: 1806
N. Monroe;Little Rock, AR. 72207
|