Investment Methodology

The heart of the HJA investing process is the Hugh Johnson Methodology, which was developed by Hugh Johnson when he served as Chief Economist and Chief Investment Strategist at First Albany Companies. This time-tested and disciplined methodology strives to add value at each stage of the decision-making process.

There are two parts of the methodology: the "top-down" part and the "bottom-up" part.

The "top-down" methodology is designed to determine, based upon market and economic trends, where we are in the current stock market-economic-interest rate cycle. If we can determine where we are in the current cycle, then making the important structural decisions for a portfolio becomes easier. The structural decisions include asset allocation, sector allocation, capitalization allocation, and style allocation. There are times when investors should have a high allocation to equities within their guidelines and times when they should not. Our methodology is designed to calculate "what is best for where we are." Preserving capital in bad markets is, in our view, the key to good longer-term performance.

Making top-down structural decisions for investment portfolios is important. But there is more to investing than structure. It is also very important to be good at choosing individual stocks and bonds. HJ Advisors has developed proprietary methodologies for choosing individual equities and fixed-income securities. The process of choosing individual equities (we call this "the bottom-up" part of the process) consists of three important steps: technical analysis with an emphasis on relative performance, quantitative analysis or a detailed analysis of a company’s financial performance, and fundamental analysis or a study of everything else that a company has to offer from its competitive advantage to the quality of its management.

Often we use Exchange-Traded Funds (ETFs) for individual and institutional investors that do not want the risks associated with owning individual companies. We call these "enhanced index portfolios."