Taylor Frigon Capital Management Open House, July 2012

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Taylor Frigon Capital Management hosted an Open House with wine and hors d'oeuveres at our new offices in San Luis Obispo on July 12, 2012. If you were able to attend, these were the slides that were displayed on the circular walkway. If not, you can view them as a slideshow here.

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Taylor Frigon Capital Management Open House, July 2012

  1. 1. A Tribute to Richard C. Taylor, 1934 - 2004 The “Taylor” in Taylor Frigon Capital Management honors Richard C. Taylor, Gerry Frigons father-in-law and mentor. Mr. Taylor managed portfolios alongside Thomas Rowe Price Jr. in the 1960s and 1970s before founding his own investment management firm in 1988 in Santa Barbara, California. Mr. Taylor was an intelligent, client-focused asset manager who believed that investors could earn superior returns by investing in well-managed companies. His passion for providing value to clients remains the foundation of our philosophy today. Richard C. Taylor 1934- 2004Gerry Frigon is the Founder of Taylor Frigon CapitalManagement and also serves as Managing Member ofTaylor Frigon Capital Advisors, General Partner toTaylor Frigon Capital Partners, LP, a private investmentfund which invests in private companies and smallemerging public companies. He has over twenty-fiveyears of experience in investment strategy, planning andportfolio management for private investors andinstitutions. For the past seventeen years, he hasmanaged portfolios with the same disciplined processdirectly descended from the classic growth philosophydeveloped by Richard C. Taylor and T. Rowe Price. Gerry Frigon President and Chief Investment Officer ~ Grow With Us ~
  2. 2. AYLO IGO CAPITAL MANAGEMENT LLC Grow With Us CORE GROWTH COMPOSITE As of 06/30/12NA - Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year.*Cumulative (non-annualized) since inception date 1/19/07# Preliminary pending examination by Ashland** As of 2010, for composite calculation, CoreGrowth Strategy accounts from the same Household were combined into one account.Core Growth Composite contains fully discretionary Core Growth accounts and for comparison purposes is measured against the S&P 500 and Russell 3000 indices. TheCore Growth Composite was created 01/1/2007. Taylor Frigon Capital Management, LLC (TFCM) claims compliance with the Global Investment Performance Standards(GIPS®) and has prepared and presented this report in compliance with the GIPS standards. TFCM has been independently verified for the periods 01/19/2007 through12/31/2010 by Ashland Partners & Company LLP.Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policiesand procedures are designed to calculate and present performance in compliance with GIPS standards. The Core Growth Composite has been examined for the periods1/19/07 through 12/31/10. The verification and performance examination reports are available upon request.TFCM is an independent registered investment adviser. The firm’s list of composite descriptions is available upon request. Results are based on fully discretionary accountsunder management, including those accounts no longer with the firm and past performance is not indicative of future results.The U.S. Dollar is the currency used to express performance. Returns are presented gross and net of management fees and include the reinvestment of all income. Net of feeperformance was calculated using actual management fees. The annual composite dispersion presented is an asset-weighted standard deviation calculated for the accounts inthe composite the entire year. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. The investmentmanagement fee schedule for the composite is 1.25% on the first $5 million and 1.00% after $5 million, with a minimum of $15,000.00 annually. Actual investment advisoryfees incurred by clients may vary.
  3. 3. AYLO IGO CAPITAL MANAGEMENT LLC Grow With Us GROWTH STRATEGY As of 06/30/12INVESTMENT MANAGEMENT PHILOSOPHYWe invest client assets in outstanding companies with excellent growth or income prospects. To find them, we bring a rigorous analytical approach to our invest-ment selection process, employing both qualitative and quantitative research techniques. We invest for the long term, but maintain disciplined risk managementand sell criteria in the construction and management of client portfolios.CORE GROWTH STRATEGY TOP 10 HOLDINGS MARKET CAPOnce a client’s investment strategy has been determined, we construct a BY WEIGHTING ($BIL)customized, diversified portfolio. For core holdings, we look to identifyAmerica’s next great growth companies: the innovators that solve problems, Qualcomm Inc. 95.5 Fiserv Inc. 9.9create new markets, and improve our world. We seek strong, well-run EZchip Semiconductors 1.1businesses at the leading edge of global-macro trends, companies with Intuitive Surgical New 22.0promising revenue and earnings growth that are not yet well recognized or Portfolio Recovery Assoc. 1.6fully valued, and we own them long term through many market cycles. Amazon Com Inc. 102.9 World Acceptance Corp. .9 Tractor Supply Co. 6.0GROWTH SELECTION PROCESS MWI Vetrinary Supply Inc. 1.3We don’t trade stocks, we buy businesses we want to own - and our Equinix Inc. New 8.3investment selection process reflects that philosophy. Our efforts are focusedon identifying promising growth companies which clients can own for several PORTFOLIO CHARACTERISTICSyears: companies whose financial strength and strategic vision provide TFCM S&P 500maximum potential for long-term capital appreciation. Using traditional 5 yr EPS Growth 18.0% 8.2%fundamental analysis and quantitative metrics, we assess a company’s business 5 yr Sales Growth 10.6% 6.2%strategy and market position; evaluate its prospects for earnings, revenue Return on Assets 11.2% 3.2%growth and margin expansion; and compare its attributes to others in its Return on Equity 16.9% 14.6%industry. We analyze management’s ability to adapt to shifting market Avg Market Cap $24,845M $25,843Mconditions, instill tight internal controls, and meet or exceed expectations; and Projected 10yr Growth Rate 16% 10%we assess how the company will benefit from global macro trends and themes. Net Profit Margin 14.9% 8.5% Operating EPS Yield 2.7% 7.2%Our objective is to purchase outstanding, high-growth businesses and own Average Portfolio Turnover 29.43% n/athem for many years until their value is fully realized.DISCIPLINED SELL CRITERIAWe utilize clearly defined sell criteria to realize profits and maintain our INDUSTRY SECTOR TFCM S&P 500portfolio risk profile. On the upside, we generally sell a position when it Consumer Discretionary 14.11% 10.96%reaches our view of maturity - although that may occur years after the initial Financials 5.53% 14.41%investment. Conversely, a position is generally sold if there is a negative Health Care 13.11% 11.99% Industrials 17.16% 10.46%change in the company’s long-term outlook, or significant deterioration in any Info Technology 44.32% 19.74%key performance measurement. An investment position may also be sold orreduced if a more attractive opportunity is identified.RISK MANAGEMENTRisk management is as important as stock selection. Ownership of high-quality, well managed, growing companies over many years provides investors with anunderlying margin of safety. Investment in companies with significant cash flows and/or growing dividends adds further downside protection. We also managerisk through portfolio diversification and position limits. We hold securities in a variety of industries and sectors, limit initial positions to no more that 4% ofportfolio holdings, and monitor client portfolios daily. We invest our capital alongside our clients’, which underscores our commitment to managing risk. © 2012Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance thatthe future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this newsletter (article), will be profitable, equal anycorresponding indicated historical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no long-er be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receiptof, or as a substitute for, personalized investment advice from Taylor Frigon Capital Management LLC. To the extent that a reader has any questions regarding the applicabilityof any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. A copy of our current writ-ten disclosure statement discussing our advisory services and fees is available for review upon request. www.taylorfrigon.com
  4. 4. AYLO IGO CAPITAL MANAGEMENT LLC Grow With Us INCOME STRATEGY As of 06/30/12Income Strategy Current Yield* as of 06/30/12: 6.2%*Current Yield represents the annualized dividend and interest payments divided by the current market value of the Income StrategyComposite on the date referenced.NA - Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year.*Cumulative (non-annualized) since inception date: 03/31/07# Preliminary pending examination by AshlandIncome Composite contains fully discretionary Income accounts. The Benchmark Indices used for comparison to the TFCM Income Composite (S&P 500, U.S. 91-Day T-Bill Index, ML High Yield Master II and the ML US Domestic Master) are meant to be considered in the aggregate as opposed to individually since components of the strate-gy employed may include securities that resemble these indices but to varying degrees. For the most recent year-end, recommended asset allocations that should be consideredwhen viewing the benchmark returns as an aggregate are: S&P 10%, T-Bill 10%, ML Dom 40%, ML High Yield 40%. The Income Composite was created 03/31/2007.Taylor Frigon Capital Management, LLC (TFCM) claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this reportin compliance with the GIPS standards. TFCM has been independently verified for the periods 01/19/2007 through 12/31/2010 by Ashland Partners & CompanyLLP. The verification report is available upon request.Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policiesand procedures are designed to calculate and present performance in compliance with GIPS standards. Verification does not ensure the accuracy of any specific compositepresentation.TFCM is an independent registered investment adviser. The firm’s list of composite descriptions is available upon request. Results are based on fully discretionary accountsunder management, including those accounts no longer with the firm and past performance is not indicative of future results.The U.S. Dollar is the currency used to express performance. Returns are presented gross and net of management fees and include the reinvestment of all income. Net of feeperformance was calculated using actual management fees. The annual composite dispersion presented is an asset-weighted standard deviation calculated for the accounts inthe composite the entire year. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. The investmentmanagement fee schedule for the composite is 1.25% on the first $5 million and 1.00% after $5 million, with a minimum of $15,000.00 annually. Actual investment advisoryfees incurred by clients may vary.The Merrill Lynch US Domestic Master index is a capitalization weighted aggregation of outstanding U.S. treasury, agency and supranational, mortgage pass-through, andinvestment grade corporate bonds meeting specified criteria. This version is the total return version where dividends are reinvested into the index value.The Merrill Lynch High Yield Bond Master II Index is an unmanaged index that tracks the performance of be-low investment grade U.S. dollar-denominated corporate bondspublicly issued in the U.S. domestic market. The unmanaged indices do not reflect fees and expenses and are not available for direct investment.
  5. 5. AYLO IGO CAPITAL MANAGEMENT LLC Grow With Us INCOME STRATEGY SNAPSHOT AS OF 06/30/12INCOME STRATEGYFor clients who may need more safety or income, we add an appropriate mix of less volatile, higher-yielding securities. We consider corporate equity, preferredand debt securities and closed-end investment companies as well as government and municipal fixed income instruments. Our objective is to maximize incomeand minimize risk without sacrificing potential price appreciation. US High Yield Closed‐end  Investment Co, 9.00% Global Energy, 5.75% US Fixed Income Closed‐ end Investment Co, 3.75% Cash, 11.75% Specialized Finance,  2.00% Global Fixed Income  Closed‐end Investment  Co, 3.75% Loan Participation Closed‐ end Investment Co,  25.00% Global Financial  Preferreds, 22.00% Industrial Preferreds,  0.00% Industrial Companies,  17.00%SELECTED TFCM INCOME STRATEGY HOLDINGS BARCLAY’S BANK 7.75% PREFERRED SERIES C NORDIC AMERICAN TANKER SHIPPING, LTD AEGON FLOATING RATE PREFERRED . MCDONALDS Corp. BANK OF AMERICA FLOATING RT PFRD NUVEEN FLOATING RATE INCOME CLOSED-END INVESTMENT CO. GOLDMAN SACHS PREFERRED SERIES B ING GROEP NV 6.125% PREFERRED PAYCHEX INC.INCOME SELECTION PROCESSFor the income component of client portfolios, we consider debt and equity of companies with growing cash flows and strong balance sheets, combined with his-tories of dividend increases. When utilizing bonds, preferred equity or convertibles we generally take positions in issuers who demonstrate a sufficient ability tocover their liabilities with cash flow. We will use closed-end investment companies when opportunities arise to exploit wide discounts to the underlying net assetvalue and/or provide exceptionally high current yields.An important consideration in the construction of our Income Strategy portfolio is the diversification of income streams. We focus on strategically allocatingcapital amongst different industries/sectors so the economic sensitivities of one group will offset those of another, thereby reducing volatility in the underlyingvalue of the portfolio while maintaining the income stream. While clearly a cornerstone of any income investment strategy is a “fixed” income stream, we believemost income investors overstate it in their portfolio and as a result subject their wealth to an undue level of interest rate and inflation risk. We certainly view fixedincome instruments as key to the Income Strategy, but we also believe in exposure to “variable” income streams including those that have a propensity to rise (ie.common dividends). The Income Strategy is “value oriented” in that we are looking to buy streams of cash flow as cheaply as possible. © 2012Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of anyspecific investment, investment strategy, or product made reference to directly or indirectly in this newsletter (article), will be profitable, equal any corresponding indicated historical performance level(s), or besuitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that anydiscussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon Capital Management LLC. To the extent that areader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. A copyof our current written disclosure statement discussing our advisory services and fees is available for review upon request. www.taylorfrigon.com
  6. 6. AYLO IGOCAPITAL MANAGEMENT LLC Equity Research Our research process begins with careful screening of the best potential investment candidates, using a variety of proprietary measurements and criteria. Suitable candidates are next evaluated to determine whether they fit major themes or paradigms: whether they are positioned in front of “fertile fields for future growth.” Businesses which pass these initial hurdles are then subjected to rigorous analysis and evaluation, in which financial statements, business performance, leadership, capital structure, shareholder dilution, and many other factors are carefully examined. We often visit with management teams,in addition to using other investigative methods and evaluation techniques. We prepare written internal reports exclusively for our firm. The analysis process has multiple levels, and potential investments may be placed in “observation deck” status for some period of time. Director of Research, Dave Mathisen, has nearly ten years of professional investment management experience. He is a former Army officer and a graduate of West Point.
  7. 7. AYLO IGOCAPITAL MANAGEMENT LLC WEALTH ALLOCATION PLANNING Over 20 years of consecutive portfolio management enables us to bring a unique perspective to managing your accounts.  Our experience includes careful analysis of the balance sheets of large successful corporations.  This experience provides us with insights into the planning and allocation of your own personal family “balance sheet” of assets and liabilities.  We help you see opportunities or areas that need more attention.  Our wealth planning team collectively represents over 72 years of professional financial management experience Our Wealth Allocation Plan (WAP) provides you with a powerful visual report along with real recommendations for decisions.
  8. 8. AYLO IGOCAPITAL MANAGEMENT LLC Taylor Frigon Capital Partners is a private investment partnership that invests in the most promising and innovative emerging private and public companies. Cloud-based rendering of even Medical company which developed a the most graphically intensive patented and proprietary IV catheter. applications, to transform film, The Venaglide contains passive saftey gaming, and computing. features to improve catheterization. Multi-core processors for wireless Creating carbon-nanotube technology radio solutions. Enables full solutions with a wide variety of potential software programmability of tasks applications. Currently focused on to create a software-defined radio filtration for water, air, and fuel. solution.

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