Our approach to equity portfolios is based on the belief that sector and industry selection are instrumental in driving the performance of stock portfolios over time. While studies show market and sector forces contribute varying percentages of price movement, we do believe that combined market and sector forces typically cause a significant portion of price movement in any given stock. Under this premise, company fundamentals usually account for a much smaller percentage of a stock's price movement yet many managers spend nearly 100% of their time focused on this area. Greenwood Capital's approach to investing incorporates all of these factors into developing our equity portfolios.
Our process involves an assessment of the current economic, market and political environments with respect to the overall business cycle as well as sector and industry trends and themes. Our thematic approach helps indentify investment opportunities in early stages and may incorporate firms across multiple industries and sectors. After establishing sector and industry preferences, individual stock selection is based on multiple quantitative and qualitative factors, including earnings trends, valuation and relative performance. Our goal is to build a portfolio that will not only outperform the market over time, but one that is broadly diversified among various economic sectors and industry groups. As an integral part of our equity management process, we continuously monitor the fundamentals and valuation of the companies in our equity portfolios.
Our committee of investment professionals meets regularly to assess current portfolio holdings and sector/industry exposures, as well as to evaluate new investment opportunities. Changes in the portfolio may occur to due to macro factors, thematic changes leading to shifts in sector/industry preferences or deterioration in earnings trends at the individual security level.