MCGEHEE CAPITAL MANAGEMENT


"Investing For The New Millennium"

 

Thank you for your interest in MCGEHEE CAPITAL MANAGEMENT, INC!

The focus of our stock selections are based on technical chart readings, fundamental valuations, cyclical tendencies, and most importantly our proprietary timing tool, "The McGehee Trend-Turn Indicator."
"EQUITY INVESTMENT PHILOSOPHY "

There are five steps in the highly disciplined stock selection process at McGehee Capital Management. The first step is the very unusual, yet highly disciplined "top- down" stock selection process. While the "top-down" approach goes against the grain of most stock market gurus, McGehee's extensive research proves that certain stock groups outperform others during both bull and bear market cycles. Concentrating in these stocks should help McGehee outperform the market over the long-term.

The second step is to use the"McGehee Trend-Turn Indicator." This is our proprietary market-timing tool developed over the last 30 years. While most will tell you it is impossible to time the market, our indicator has routinely called market turns allowing us to raise capital during corrections.

The third step of due diligence involves the analysis of individual stock charts to identify those technically poised to outperform the market. This technical analysis can help identify either stocks with a high degree of relative strength or those that are oversold, both basing for an advance.

The forth step involves fundamantal analysis of companies chosen in steps one and three. Among the criteria used are: increasing revenues and earnings per share, improvement in profit margins, reasonable price to earnings ratio based on expected earnings, and market niche.

The fifth step involves a stock allocation model allowing McGehee to attempt to produce balance portfolios with respect to risk. The Agressive Growth Portfolio contains approximately 20% of its stocks invested in well established large-capitalization stocks, 50% in moderately established mid-cap stocks with moderate risk, and 30% in lesser known small-capitalization stocks with a high risk/reward ratio. In the Growth Portfolio approximately 70% of the stocks will be invested in established large capitalization less risky stocks and 30% in moderately established mid-cap stocks with moderate risks.

The value of this rigorous five step due diligence has been extraordinary. Each portfolio contains between 15 and 40 stocks meeting our criteria. The Growth Portfolio, and the Balanced Portfolio have low turnover rates, thus allowing for long-term capital gains. The Aggressive Growth Portfolio turnover is higher, with some long-term capital gains. Over the intermediate and long-term our portfolios tend to outperform their benchmarks.


"FIXED INCOME PHILOSOPHY"

McGehee's fixed income investment objective is to generate competitive total returns, with an emphasis on protection of capital. To reach these objectives we include the following factors in our decision making process: interest rate trends, maturity structure, and quality. We are more interested in holding issues to maturity, thus receiving interest payments, than we are in trading issues for capital appreciation.

The first and most important step in our process is to forecast the trend in interest rate movements. The trend forecast starts with an in-depth technical analysis using a broad varity of interest rate charts. McGehee follows that with fundamental macro-economic analysis, developing a model for the economic outlook and inflation.

Secondly, a maturity structure is selected to take advantage of positive interst rate trends or to protect against negative interest rate trends. There are times when we concentrate on the highest quality government bonds or short-term instruments and times when we concentrate on high quality corporate bonds. This depends on credit spreads and our analysis of macro-economic conditions.

We invest in fixed income mostly thru ETFs. The advent of fixed income ETFs allows diversity, liquidity, hedging and professional management. Money market funds may also be used as part of an investment philosophy and/or hedge against market movement.


"BALANCED PORTFOLIO PHILOSOPHY"

The Balanced Portfolio mixes both stocks and fixed income instruments. This gives one the safety and current income of fixed instruments and the long-term appreciation of stocks necessary to historically beat inflation. By having exposure to two different asset classes, which often move in oppisite directions, one usually reduces the volitility associated with just one asset class.

McGehee's approach to the proper mix between stocks and fixed income for an individual investor is obtained by using the following formula: 120 minus investor's age equals assets in stocks. The remainder will be allocated to fixed income. This enables one to automatically become more conservative with age. For institutions the ratio will be determined by economic conditions. Of course McGehee is here to serve the needs of our clients, therefore, we can work with you to customize your asset mix depending on individual risk tolerance, time horizon, and income needs, etc.

Finally, we do not necessarly seek capital gains by trading fixed income instruments. We will however time the market to take advantage of inefficiences between short-term interest rate trends and long-term rate trends. Thus tending to invest near the optimum price entry point.





"PORTFOLIO OBJECTIVES, and FEE SCHEDULE"

McGehee Capital Management offers the following portfolios:


1) AGGRESSIVE GROWTH: This portfolio will be invested in large, medium and small capitalization stocks, which we view as having above average potential for price appreciation. Many of the stocks pay good dividends. The benchmark will be the S&P 500 Index. The portfolio will be mostly invested in medium capitalization stocks, with some small and large capitalization stocks mixed in. Some positions will be held for long-term capital gains. The portfolio will inherently be subject to a medium risk/reward ratio. The portfolio is usually 100% invested in stocks. From time to time a percentage of the portfolio can be in cash fixed income or short the market to protect against pullbacks. Turnover is high.


2) GROWTH: This portfolio will be invested in large to medium capitalization stocks, which we view as having above average potential for price appreciation. Many of the stocks pay really good dividends. The benchmark is the S & P 500 Index. Most stocks will be held for long-term capital gains to take advantage of the lower tax bracket. The portfolio is usually 100% invested in stocks. From time to time a small percentage of the portfolio can be in cash fixed income or short the market to protect against pullbacks. Turnover will be moderate.


3) BALANCED: This portfolio will be invested in stocks and fixed income securities. The current return(i.e. dividends and coupons) will be higher than the above portfolios. The ratio of stocks to fixed income will vary. For institutions the ratio will be determined by economic conditions. For individuals the following formula is suggested. 120 minus investor's age equals pertcentage of portfolio in stocks. If you prefer a set percentage in fix income that can be specified. We offer 3 options of the Balanced portfolio.

80% stocks / 20% fixed income; 70% stocks / 30% fixed income; 60% stocks / 40% fixed income.
 



Past performance does not guarantee future results!

FEE SCHEDULE


Account Total: First $500,000   Next $500,000   Next $4 million   Next $5 million

-AGGRESSIVE GROWTH AND GROWTH PORTFOLIOS (annual fee):

2% 1.50% 1.00% .85%


-BALANCED PORTFOLIO (annual fee):

80/20: 1.75% 1.35% .85% .70%
70/30: 1.45% 1.10% .75% .60%
60/40: 1.20% .90% .65% .55%


Fees on assets over $10,000,000. are negotiable.
Minimum Account Size: $100,000.

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Billing:

A quarterly fee is charged in advance at the rate of 1/4 of the above percentages on the account total of the last business day of the previous quarter. Fees are calculated based on the total value of one person's accounts. This fee is deducted from the Client's account and paid to McGehee Capital Management, Inc., unless otherwise agreed to in writing. McGehee Capital Management may maintain a cash position or fixed income in any account for defensive purposes at any specifix point in time, depending upon perceived or anticipated market conditions/events (there being no guarantee that such anticipated market condition/events will occur). All cash and fixed income positions (money market, etc) shall be included as part of asstes under management/account total for purposes of calculating the advisory fee.

Past performance does not guarantee future result Stocks and fixed income instruments may lose part or all of their value.
March 2012

If you are interested in our managed accounts, please contact us for our Brochure(this is required by the SEC).

The Brochure contains even more information including ADV Form Part II, and Agreement Form.

The sign-up is simple and we will lead you through the process. E-mail, call or write Stewart B. McGehee: