Our AFG 50 Performance Review

The AFG 50 is an actively managed portfolio of 50 stocks, designed to outperform its benchmark (S&P 500) while remaining sector-neutral. The AFG 50 Portfolio serves as an outsourced research team, as our analysts monitor each major economic sector to provide our clients with actionable buy ideas backed by detailed models, reports, updates and a backup list for possible replacements within each sector. Anytime there is a change made to the portfolio, i.e., a new stock, reiterated/change of buy/sell recommendation or adjustments made to models, our clients are immediately notified via e-mail.

The AFG 50 was launched on June 10, 2004 at AFG’s inaugural client conference. Through June 1st, 2009, our clients have enjoyed the following performance:

Outperforming the Benchmark 4 of 5 years with Cumulative Performance of over 1,100 bps.

• AFG50 and AFG100 are model portfolios and results do not include management fees or transaction costs
• AFG50 and AFG100 are re-balanced at end of each quarter to remain sector neutral vs. their respected benchmark, S&P500 and Russell 2000
• Average Annual Turnover: AFG50 less than 20%, AFG100 less than 40%

AFG 50:
• An actively managed portfolio of 50 stocks, remaining sector-neutral.
• Long-only and targeting turnover of less than 40% annually.

Our Goals:
• To consistently beat the index our clients are most often measured against, the S&P 500.
• To serve as an outsourced research team, distributing relevant content to our clients on a timely basis.
• To provide consistent, actionable buy ideas in each major economic sector.

Here is a sample report from our AFG 50 model portfolio. The AFG 50 model portfolio provides institutional investment firms access to a devoted research team and investment process with the specific goal of consistently beating the S&P 500. The AFG 50 leverages our client’s investment process and enables them to focus on their core strengths. Below is a sample equity research report updating our thoughts on CTSH:

CTSH Investment Summary:
Cognizant was able to grow its economic margins from 2001 to 2007 as the economy was booming and more firms were turning to outsourcing and other business-enhanced services. Accordingly, the company was able to grow its top line by at least 20% each year, while maintaining strong EBITDA margins at 20% and above. Due to the economic crisis in 2008, Cognizant’s EM declined for the first time in 7 years, but only to a very modest degree. In light of the current environment, EMs are expected to decline moderately again in 2009, as revenue and profit growth decelerate from previous years’ levels due to the weakening demand for some services. We expect the company to maintain EMs of at least 10% going forward. Cognizant has been consistently growing at a faster rate than its steady state growth rate. Each year, the company makes small acquisitions to further expand its industry knowledge and expertise. Our model assumed no more acquisitions in the 2009-2013 period, and we expect the company to slightly temper its infrastructure build in response to the economic environment.