3945 East Paradise Falls Dr. #261
Tucson, AZ 85712





Investment Philosophy

The general investment philosophy employed at Burk, Hall & Co. is partially founded on the principles of Modern Portfolio Theory (MPT). This theory was established by UCLA economics professor Dr. Harry Markowitz. He was later awarded the Nobel Memorial Prize in Economic Sciences for this theory. Markowitz's theory examines capital markets from a standpoint of statistical probability using many years of market data from which to draw conclusions. The core thesis of MPT is that different segments of the stock and bond market perform at different rates at different times. It concludes that, in order to reduce risk, it is critical that an investment portfolio be diversified among different asset classes. The term for this process is asset allocation.

While it is true that risk to a portfolio may be reduced by utilizing asset allocation, at Burk, Hall & Co. we believe that this is only the first step in seeking to reduce risk and achieve superior portfolio returns. As stated above, the core of Modern Portfolio Theory is the principle that different asset classes perform at different rates at different times. As such, we work hard to employ a level of tactical asset management that allows us to overweight the asset classes and sectors that are outperforming, while underweighting those that are underperforming.

Our decision to overweight or underweight an investment in a client's portfolio is by a technical analysis derived from Point and Figure Charting, and the measurements of relative strength. Point and Figure Charting was originally developed by Charles Dow in the 1800's. For more than thirty years Dorsey, Wright and Associates have advanced Point and Figure Charting by employing computers and technology to refine this technical analysis. These strides in technology have given us the ability to measure the Relative Strength of any market, asset class, sector, or stock against another. To give you some perspective, ten years ago our practice was charting no more than thirty stocks by hand each and every day. With today's technology, we can review over 100 charts daily. It is a lot of work, but we firmly believe that outperformance and risk reduction is possible by dedicating ourselves to a discipline of sound technical analysis, good fundamental research, and proper asset allocation.

Most financial advisors and money managers, if they are employing principles of MPT, will rebalance their portfolio at set intervals of time with regard to the strength or weakness of the investment style. With this approach, you take from the strong and give to the weak upon a theory that you cannot time the market and at some point in the future, the weak will become the strong again. In contrast, when utilizing technical analysis and measurements of relative strength, we will rebalance when there is a reason to rebalance. In this manner, we will stay in strong asset classes and sectors until they exhibit weakness, or until a peer asserts itself as an outperformer. This approach recognizes that some asset classes and sectors will remain strong and outperform their peers for an extended period of time - sometimes many consecutive years. In short, while we believe that risk in a portfolio will be reduced by employing diversification, our strategy seeks to ensure that your assets will be over-weighted in the asset classes and sectors that are outperforming. With the technology and technical analysis available to us today, we believe this goal is achievable.

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