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www.stjamesia.com St. James Investment Advisors 1-800-966-9343 Balanced Portfolio (Formerly Blue Chip Dividend with Income) Objective The St. James Balanced Portfolio seeks to provide total return through a combination of equities and fixed income. The equity portion of the portfolio places an emphasis on selecting companies with above average dividends and those trading at reasonable discounts from our assessment of intrinsic value. The fixed income portion of the portfolio provides long-term growth of income and a moderate level of current income. Philosophy Absolute Return: We are absolute return investors and each investment must meet our strict fundamental research and macroeconomic criteria, not just offer opportunity relative to other alternatives. Long-term focus: We believe the best way to accomplish our goals is to accept short-term underperformance in exchange for long-term success. We expect to hold our investment positions unless fundamental valuation parameters change. We are not speculators and adhere to a strict value investment discipline. We are willing to hold cash. Why We Believe Dividends Are Important: • Over the long term, the return from dividends has been a significant contributor to the total returns produced by equity securities. According to Standard & Poor’s, dividends comprised an average of 35% of the monthly total return of the S&P 500 from 1926 to 2009. • Stocks with apparent high and sustainable dividend yields may be more resistant to a decline in price than lower yielding stocks because the stock is in effect “yield supported.” • There is an abundance of empirical evidence which suggests that portfolios consisting of high dividend yielding securities may produce attractive total returns over long measurement periods. Focus as bottom-up managers: Most of our energy goes to evaluating investment opportunities and trying to quantify potential downside scenarios. However, we do take some interest in the macro environment, as economic conditions profoundly affect the business models we are evaluating. Primary Portfolio Equity portion will be invested in dividend-paying equities and the fixed-income portion of the portfolio will utilize electronically traded funds or select fixed-income securities. St. James Investment Advisor We are professional portfolio managers Committed to Value Investing. St. James is an independent, fee-only, United States Securities and Exchange Commission registered investment advisory firm, providing customized portfolio management services to individuals and their financial advisors. Partnership Investing We invest our money alongside you as partners in our process. As managers we have significant amounts of our own capital invested in the strategy. Governing Principles We will primarily invest in blue chip companies with above-average dividend yields and an established history of paying dividends. The fixed income portfolio places an emphasis on investment grade quality bonds. We will treat your investment with St. James as if it were our own. We will remain significant investors with you in St. James Investment Advisors portfolios. Our decision-making process takes full advantage of individual insights within a partnership oriented culture. We are patient, long-term investors. We will discourage short-term speculators and market timers. We will communicate with our investment partners as candidly as possible. We think “benchmark risk” is part of investment life. Our firm’s goal is to earn good absolute investment returns over long periods of time without exposing our clients’ capital to undue risk. We do not think about any particular index when we make investment decisions.
All investing involves risk of loss, and the St. James Balanced Portfolio investment strategy could lose money over short or even long periods. TheInvestment Highlight position described above was randomly selected and was not selected based on performance. Views expressed regarding aparticular company, security, industry, or market sector should not be considered an indication of trading intent of any investments managed by St. JamesInvestment Advisors. These views should not be considered investment advice, nor should they be considered a recommendation to buy or sell. Data isbased on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy. Presentations of composite performance are available upon request. Part 2 of form ADV is available upon request or at www.stjamesia.com. www.stjamesia.com St. James Investment Advisors 1-800-966-9343Balanced PortfolioQuarter Ending June 30, 2024 | Commentary
Fundamentals and valuation are components for managing a portfolio that provide a sharper focus in navigating a paththrough the current U.S. economic and political environment. With the first half of 2024 presenting market volatility and acouple of surprises it is more important than ever to focus on these two aspects of portfolio management. A key change tomarkets in 2024 is expanding market breadth; given their earnings growth potential and valuation gaps, more stocks will beparticipating in the market. While the “Magnificent Seven” technology stocks remain popular, there is a strengthening casefor broadening market returns. Even after removing these mega-cap tech stocks, Wall Street's steady earnings growthprojection over the next two years remains encouraging. Focusing on fundamentals and valuation can help identify bothovervalued and undervalued companies; a deep dive into the underlying fundamental aspects of a company’s businessprovides a more meaningful valuation of the company overall. While most investors are focused on growth investing, thereare many other compelling reasons to consider when investing in value companies: underlying strengths, brand recognition,and skilled leadership drive growth and shareholder value. Furthermore, legendary investor John Templeton warns growthinvestors of the dangers of falling into the base-less “this time is different” mindset, but with value investing every decision is backed by highly researched, all-encompassing ideas that provide meaningful company insights.
During the last quarter the St. JamesBalanced Portfolio benefitted withexposure to:
During the last quarter the St. JamesBalanced Portfolio exposure to thefollowing was negative:
The following are the individualcontributors and detractors from theportfolio during the last quarter:
As of quarter-end, the St. JamesBalanced Portfolio had the followingcompositions:
Investment Highlight Amgen Inc. (AMGN) is a leader in biotechnology-based human therapeutics. The Company discovers, develops, manufactures anddelivers various human therapeutics. It focuses on areas of high unmet medical need and leverages its expertise to strive for solutionsthat improve health outcomes and improve people's lives. Flagship drugs include red blood cell boosters Epogen and Aranesp, immunesystem boosters Neupogen and Neulasta, and Enbrel and Otezla for inflammatory diseases. Amgen introduced its first cancer therapeutic,Vectibix, in 2006 and markets bone- strengthening drug Prolia/Xgeva (approved 2010) and Evenity (2019). The acquisition of Onyxbolstered the firm's therapeutic oncology portfolio with Kyprolis. Recent launches include Repatha (cholesterol-lowering), Aimovig(migraine), Lumakras (lung cancer), and Tezspire (asthma). The 2023 Horizon acquisition brings several rare disease drugs, includingthyroid eye disease drug Tepezza. Amgen also has a growing biosimilar portfolio. Amgen has a market capitalization of $167.61 billionand generated 2023 annual revenue of $28.19 billion. •
Financials•
Consumer Staples•
Energy• Select Health Care • Consumer Discretionary • Communication Services Contributors: Detractors: The Williams Companies Inc. Johnson & Johnson Walmart Inc. McDonald’s Corp. Bank of America Corp. Comcast Corp. Equities: 45.00%Fixed-Income:53.25%Cash Equivalents:1.75% Total: 100.00%