Philosophy We are value investors, which means that we invest in companies that we believe are trading at a significant discount to intrinsic business value. In our experience, purchasing businesses at a discount to value minimizes risk while providing substantial profit potential. We are patient investors, not market timers. We believe that, over time, the price of a stock will rise to reflect the value of the underlying company. Our investment time horizon is long-term, generally three to five years. Every stock purchase is viewed as if we were buying a piece of a business, not just a stock certificate. We use our proprietary research to build focused portfolios - sufficient for diversification, but concise enough so that our best ideas have a meaningful impact on investment performance. Process We focus primarily on free cash flow and company management, rather than on more traditional measures of value such as low price-to-earnings or low price-to-book ratios. Additionally, we often look for hidden assets, under-appreciated franchise values, or potential benefits from restructuring. Because of our unique approach to value, our in-house research effort provides the foundation for our process. Our research analysts are generalists and search for value in the stock market wherever it may be, regardless of industry. This structure provides a much broader perspective, and it enables us to assess relative values among companies in different industry sectors. From the universe of investible securities, we apply quantitative screens to determine which securities meet our initial criteria. Next, an analyst researches the company extensively, examining the business model, meeting with company management, and speaking to the company's clients, vendors, and competitors. Once an analyst identifies an attractive stock, the idea is brought to the regular meetings of all of the firm's analysts, portfolio managers and investment professionals in which current holdings, new ideas, and general market issues are discussed. New stock ideas are presented, discussed, and then voted upon. If endorsed, the stock is added to the firm's approved list. Stocks added to our approved list contain valuation and buy/sell target information developed by the analysts. Typically, the sell target is set at 90 - 100% of fair value, and the buy target is set at a significant discount to that value. These targets are then routinely updated to reflect fundamental changes in the company's business. The result is a collective effort at identifying the best values in the marketplace. From the list of approved stocks, each fund manager constructs a focused portfolio, built stock-by-stock. |
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