The overall investment process includes a ten-year historical valuation analysis, researching company fundamentals, reviewing investor sentiment, and developing future price targets. Using a large cap 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. At the conclusion of this effort we will have narrowed our universe of securities to 75-100.

These stocks are examined further from a fundamental standpoint. This fundamental analysis includes a detailed historical review of a company’s profitability, financial flexibility, return on capital and management’s track record. The objective of our fundamental effort is to identify catalysts for reversal. Additionally, investor sentiment is judged by reviewing Wall Street buy and sell recommendations, evaluating the tone of written research, and institutional commitment. At this point our universe of securities has been narrowed further to 15-25.

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 decision meeting. At this time the investment case is reviewed. Each security is then voted upon with the resulting purchase and weighting decisions made at this level. For a new purchase, a 3 to 1 upside return to fair value from the current price versus the downside target must be met. This investment approach will identify seven to ten new companies each year which will be added to our portfolios.

Holdings are reviewed daily with reports being distributed weekly. Portfolios hold an average of forty-five 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.