The Select 20 Portfolio seeks long-term capital appreciation.
The Portfolio seeks to achieve its objective by investing in a portfolio of 20 securities. The Portfolio will invest in no fewer than 15 and no more than 25 equity securities. The Portfolio is considered “nondiversified” as defined in the Investment Company Act of 1940, as amended (1940 Act), which means that it may invest in a smaller number of issuers than a diversified mutual fund.
The portfolio managers invest primarily in common stocks of companies that they believe have long-term capital appreciation potential and are expected to grow faster than the U.S. economy. The portfolio managers consider companies of any size or market capitalization. Using a bottom-up approach, the portfolio managers seek to select securities of companies that have large market opportunities. Companies that have large market opportunities are those that, in the portfolio managers' opinion, may have a large demand or market for their goods or services. The portfolio managers also consider a company’s operational efficiencies, management plans for capital allocation, and the company’s shareholder orientation.
The portfolio managers research individual companies and analyze economic and market conditions, seeking to identify the securities or market sectors that they think are the best investments for the Portfolio. Specifically, the portfolio managers look for structural changes in the economy, industry, or product cycle changes, or changes in management, targeting those companies that can best capitalize on such changes. The following is a description of how the portfolio managers pursue the Portfolio’s investment goals.
The portfolio managers strive to identify companies that offer the potential for long-term price appreciation because they are likely to experience sustainable free cash-flow growth. Using a bottom-up approach, the portfolio managers look for companies that they believe:
- have attractive end-market potential or dominance of a profitable niche market, dominant business models, and strong cash-flow generation;
- demonstrate operational and scale efficiencies;
- have demonstrated expertise for capital allocation; or
- have clear shareholder oriented governance and compensation policies.
All of these factors give the portfolio managers insight into the outlook for a company, helping the portfolio managers to identify companies poised for sustainable free cash-flow growth. The portfolio managers believe that sustainable free cash-flow growth, if it occurs, may result in price appreciation for the company’s stock.
The portfolio managers maintain a diversified portfolio, typically holding a mix of different stocks, representing a wide array of industries and a mix of small-, medium-, and large-size companies.
The portfolio managers may invest up to 20% of the Portfolio's net assets in securities of foreign issuers, including issuers located in emerging markets.
The portfolio managers may invest in real estate investment trusts (REITs).
**In the aggregate across all Portfolios of the Delaware Pooled Trust.