Focus on Value and Market Themes
At ICON, we believe markets have themes in which certain industries assume leadership for many months or even years. The industries that lead in a market theme define it. For example, the Technology industries that led the market in 1999 were followed by recession-proof industries in early 2000 in Health Care, Financials and Consumer Staples. We believe that if you can identify the industries that are leading in the market, you can capture market themes and theoretically beat the market. The question is, how can you identify market leadership?
The ICON Valuation System
ICON uses a proprietary valuation system in an effort to determine the industries that have the potential to lead in a market theme. We analyze more than 4,300 domestic and international securities. Using a quantitative system, we assign a value-to-price ratio (V/P) to each of these companies. The companies fall into 147 industry categories as determined by Standard & Poor’s and MSCI Barra and we calculate a composite V/P for each of the industries both domestically and overseas.
Those industries that demonstrate the highest value are the industries we believe will lead the market. For example, if an industry had a V/P of 1.30, it would indicate that we believe that industry is undervalued by 30% relative to our calculation of its intrinsic value. ICON ranks industries from the most underpriced to the most overpriced based on our system. Guided by these rankings, we generally purchase industries we believe are underpriced and leading the market and sell overpriced industries that we estimate are lagging the market.
In calculating these metrics, ICON also assigns an overall V/P for the U.S. and international markets using the collective composite rankings of the respective 147 industries.
ICON Market Barometers
Similar to a barometer that signals a change in weather, we use our value-to-price ratio to gauge what we perceive to be undervalued and overvalued markets. As shown above, recent month-end domestic and international V/Ps indicate widespread value.
Past performance does not guarantee future results.
Opinions and forecasts regarding sectors, industries, c ompanies, countries, and/or themes, and portfolio composition and holdings, are all subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security, industry, or sector.
There are risks involved with mutual fund investing, including the risk of loss of principal. There is no assurance that the investment process will consistently lead to successful results. An investment in a sector fund may involve greater risk and volatility than a diversified fund, and the Technology sector has been among the most volatile sectors in the market.
Investments in international securities may entail unique risks, including political, market, regulatory and currency risks. In general, there is less governmental supervision of foreign stock exchanges and securities brokers and issuers.
ICON’s value-to-price ratio is a ratio of the intrinsic value, as calculated using ICON’s proprietary valuation methodology, of a broad range of domestic and international securities within ICON’s system as compared to the current market price of those securities. To analyze intrinsic value, the ICON valuation methodology relies on the integrity of publicly released financial statements.
According to ICON, value investing is an analytical, quantitative approach to investing that employs various factors, including projected earnings growth estimates, in an effort to determine whether securities are over- or underpriced relative to ICON’s estimates of their intrinsic value. ICON’s value approach involves forward-looking statements and assumptions based on judgments and projections that are not guarantees of future results. Value investing involves risks and uncertainties and does not guarantee better performance or lower costs than other investment methodologies.
Consider the investment objectives, risks, charges, expenses, and share classes of each ICON Fund carefully before investing. The prospectus and the statement of additional information contain this and other information about the Funds; please read the prospectus and the statement of additional information carefully before investing.
ICON DistributorsSM, Distributor
Sector Weighting Comparison
Because ICON focuses on value and relative strength, we use these metrics to tilt our sector funds toward industries we believe are undervalued and poised to lead the market. ICON tracks nine market sectors that make up the S&P 1500 Index. Based on ICON’s valuation system, we tilt our diversified portfolios toward those sectors that appear to be undervalued and leading the market. We underweight sectors that we believe are overvalued and lagging the market. As a consequence, we contend certain sectors can be market leaders while others would be laggards in capturing market themes. The charts below indicate the sector weightings for the ICON Core Equity and ICON International Equity Funds compared to their respective benchmark weightings as of the most recent quarter-end.
ICON Core Equity Fund vs. S&P 1500 Index
Sector Weightings (%) as of 6/30/08
Source: FactSet Research Systems, Inc.
ICON International Equity Fund vs. MSCI All Country World Index Ex-U.S.
Sector Weightings (%) as of 6/30/08
Source: FactSet Research Systems, Inc.
Putting ICON to Work for You
ICON employs a disciplined quantitative system through a variety of mutual funds and managed products to assist financial advisers and their investors in meeting their objectives. We appreciate your interest and look forward to the opportunity serve you.
Opinions and forecasts regarding sectors, industries, companies, countries, and/or themes, and portfolio composition and holdings, are all subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security, industry, or sector.
There are risks involved with mutual fund investing, including the risk of loss of principal. There is no assurance that the investment process will consistently lead to successful results. An investment in a sector fund may involve greater risk and volatility than a diversified fund, and the Technology sector has been among the most volatile sectors in the market.
Investments in international securities may entail unique risks, including political, market, regulatory and currency risks. In general, there is less governmental supervision of foreign stock exchanges and securities brokers and issuers.
The unmanaged Standard & Poor’s Composite 1500 (S&P 1500) Index is a broad-based capitalization-weighted index comprising 1,500 stocks of large-cap, mid-cap, and small-cap U.S. companies.
The Morgan Stanley Capital International (MSCI) All Country World Index ex-United States (ACWI ex-U.S.) is a leading unmanaged benchmark of international stock performance. The capitalization-weighted index is representative of the performance of securities of companies located in developed and emerging markets outside of the United States. The Funds’ composition may differ significantly from the indexes. Individuals cannot invest directly in an index.
According to ICON, value investing is an analytical, quantitative approach to investing that employs various factors, including projected earnings growth estimates, in an effort to determine whether securities are over- or underpriced relative to ICON’s estimates of their intrinsic value. ICON’s value approach involves forward-looking statements and assumptions based on judgments and projections that are not guarantees of future results. Value investing involves risks and uncertainties and does not guarantee better performance or lower costs than other investment methodologies. ICON’s “relative strength” estimate reflects ICON’s calculation of how an individual stock has performed compared to the broad stock market over a six-month period.
Consider the investment objectives, risks, charges, expenses, and share classes of each ICON Fund carefully before investing. The prospectus and the statement of additional information contain this and other information about the Funds; please read the prospectus and the statement of additional information carefully before investing.
ICON DistributorsSM, Distributor
