Investment Counsel

8031 M-15
Clarkston, MI 48348
Phone: (800) 689-7897
Fax: (248) 625-7847

• About Us
  • Our History
  • Management Team
  • Investment Philosophy
  • Our Clients
• Services
• What Makes Us Different
• Articles & Resources
• The Investment Letter

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Investment Philosophy

The basic premise of Investment Counsel Inc.’s style is traditional and twofold:

1. Preservation of purchasing power of principal and income
2. Consistent long-term growth that outperforms the general market

We invest only in high quality stocks and bonds. We do not use speculative issues. We manage investment portfolios individually on a discretionary basis in strict adherence with your objectives, requirements and parameters. Because of this, you are assured that we are ever-vigilant of your long-term financial security.

Our investment philosophy always has been characterized by a conservative management approach with longer-term objectives the primary motivation. We avoid investment fads that come and go in our cyclical economy. Historically, the company has emphasized thorough internal research. We invest in stable, solid securities, and provide constant attention to client portfolios.

Regarding common stock investments, we focus on high quality companies with strong financial positions that possess excellent prospects for above average earnings growth and future dividend increases. Basically, we have concentrated our equity investments over the years in stocks of well-established growing companies with long histories of exceptional operating performance. We tend to hold onto companies for relatively long periods which results in low turnover and tax efficient portfolios.

We further believe it may be prudent to include investment grade fixed income securities to maximize your portfolio’s returns while preserving principal. Of course, there’s still a degree of risk with fixed income securities. So we apply the same rigorous selection and evaluation disciplines. We study individual bond maturities/durations, credit equality, credit yield history, sector strength and more. Our goal is to bring you a safer, more balanced portfolio with consistently and above market returns. Our fixed income investments have traditionally concentrated on U.S. Treasury issues, U.S. Agency securities, and some high-quality corporate notes and bonds (A rated or higher). High-quality, tax-exempt bonds are used where suitable for taxable clients.

Investment Tenets

Our research models are proprietary and were developed by the firm’s Principals. We are extremely selective, less than five percent of U.S. public companies meet our requirements. Investment Counsel’s stringent tenets and diligent research provides a short list of great businesses that remains relatively constant year to year, enabling our portfolio team to become extremely knowledgeable of our portfolio companies. Our selection process is governed by four investment tenets: Financial, Business, Management, and Valuation.

Financial

Our financial tenet requires a thorough analysis of a firm’s financials with a focus on the cash flow statement and balance sheet. We look for firms that have consistently high returns on invested capital, efficiently allocate capital, generate sufficient cash flow to accommodate growth plans, and maintain strong balance sheets that enable them to weather difficult times.

Business

We seek to hold companies for long periods of time and our business tenet forces us to ask one question, “how long has this company been around and how long will it be around in the future?” Companies in our portfolios must have a long history of consistent operating performance. We avoid trendy and cyclical commodity-like industries. We look for companies that have built competitive advantages that are difficult to replicate and who possess bargaining power in terms of customers and suppliers.

Management

Analyzing management character is a qualitative task in which we must judge people and their personalities. Our management tenet centers on a time consuming process that requires the analysis of a number of sources. Management must run the company with a focus on maximizing shareholder value. We seek managers who are candid with shareholders, have exceptional track records, set realistic goals, and consistently achieve those goals.

Valuation

Companies that meet our prior three requirements are ultimately valued via our discounted free cash flow model. We avoid calculating a target value for companies. Instead, we generate a range of values based on varying growth scenarios depending on the firm’s business environment and future cash needs. Companies trading at discounts to intrinsic value under worst case scenarios are viewed favorably by the firm and usually result in purchases. We do not require a target discount value (e.g. 40% of intrinsic value), but instead adjust this value for each company depending on risk and the certainty or uncertainty of future cash flows.