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The overall investment process includes
analyzing historical valuation ranges, researching company
fundamentals, reviewing investor sentiment, and developing
price targets. Using a large capitalization universe of approximately
one thousand companies, our research group screens five historical
valuation factors: price/sales, price/book, price/cash flow,
price/earnings and dividend yield. Based on these factors,
stocks trading in the bottom third of their ten-year historical
ranges are identified.
These stocks are examined further from
a fundamental standpoint. This fundamental analysis includes
a detailed historical review of a companys profitability,
financial flexibility, return on capital and managements
track record. The objective of our fundamental effort is to
identify catalysts that will be long-term drivers of value growth.
Additionally, investor sentiment
is judged by reviewing Wall Street buy and sell recommendations,
evaluating the tone of written research, and institutional
commitment.
Our research group then develops an investment case outlining valuation, fundamentals and sentiment.
This investment case is then presented to and reviewed by
the entire investment team of portfolio managers and analysts.
Using this research, three price targets are established.
Downside, fair and full value targets are calculated using
a 12 to 18 month horizon. This is a dynamic process and
targets are continually reviewed. The last step in our approach
is the purchase decision. At this time the investment case
is discussed and debated. Each security is then voted upon with the resulting
purchase and weighting decisions made at this level. The initial inclusion of a new security into the portfolio only occurs when the stock price is at a substantial discount to our value, thus giving us a significant margin of safety.
Holdings are reviewed daily with reports being distributed
weekly. Portfolios hold an average of forty to fifty issues. Initially
we will purchase a 1-3% position. We will add to partial positions
as issue or market weakness permits. Our maximum allocation
to a single issue will be 4% at cost, 7% at market. |
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