By Taylor Winn, Founder & President, Buckhead Wealth Management
Most investors naturally gravitate toward what has recently been working. At Buckhead Wealth, we often do the opposite. Our process emphasizes value and growth at a reasonable price, which means we are usually most interested when quality businesses or diversified themes have temporarily fallen out of favor.
Momentum vs. Valuation
It is easy to chase what has already risen. A stock or sector that has had a strong run can feel compelling simply because recent performance has been strong. But short-term momentum is not the same thing as long-term opportunity, and a rising price does not automatically mean a better investment.
Instead, we look for areas where fundamentals remain intact but sentiment has cooled or valuations have compressed. That can include diversified indices, sector funds, or individual companies, depending on the client’s objectives and risk tolerance.
How Rebalancing Works
Rebalancing is the process of trimming positions that have grown beyond their target weight and adding to positions that are temporarily underweight but still fit the portfolio’s long-term thesis.
In practice, that may mean reducing exposure to positions that have performed especially well and allocating more to areas that are currently less popular. The point is not to guess the next short-term winner. The point is to keep the portfolio aligned with the intended risk profile and to avoid becoming overexposed to whatever has recently been strongest.
Why We Separate Indices From Individual Stocks
Diversified indices and sector funds generally carry different risks than individual stocks. A diversified basket spreads risk across many holdings, while a single stock can be affected by company-specific issues such as execution risk, leverage, regulation, or product deterioration.
That is why we apply more caution to individual stocks. We may add selectively to a position that has declined if the underlying business remains sound, the balance sheet is strong, and the position still fits within our risk limits. If the facts change, we reassess.
What We Look For
Before adding to a weaker position, we focus on the business itself:
- Is the underlying thesis still intact?
- Does the company have an adequate balance sheet?
- Are cash flows and margins still supportive of the business model?
- Is the position sized appropriately within the overall portfolio?
If the answer is yes, a decline may reflect sentiment or rotation rather than permanent impairment. If not, we treat the weakness as a warning sign.
The Discipline Behind GARP
This approach is part of a broader GARP framework: buying quality at a reasonable price, trimming strength when positions become oversized, and adding selectively when sentiment creates better valuations.
The objective is not to predict next quarter’s market winners. It is to build portfolios that can participate in long-term growth while keeping risk within the bounds of the client’s plan.
Disclosure
Taylor Winn is Founder & President of Buckhead Wealth Management in Atlanta, GA. This material is provided for informational purposes only and is not intended as investment, tax, legal, or accounting advice. The views expressed are those of the author and do not necessarily reflect those of LPL Financial.
Investing involves risk, including possible loss of principal. Asset allocation, diversification, and rebalancing do not guarantee a profit or protect against loss. Any discussion of buying what is temporarily out of favor, trimming winners, or averaging into positions is for illustrative purposes only and should not be construed as a recommendation. Individual securities and sector funds involve distinct risks, and past performance is not indicative of future results.