First and foremost, we are value managers. That is, we invest in high-quality companies which we believe are significantly undervalued. To us, our approach is the purest form of value management. Our philosophy centers around understanding the natural behavior of markets and investors. Consequently, we consider the following points in determining the value of potential investment candidates:

Human Emotion - Understanding human emotion is key to being successful in the investment management business since investors tend to overreact in their optimistic views as well as in their pessimistic views. As investors overreact to near-term events, they create overvalued and undervalued security prices in relation to a company’s long-term outlook.

Price and Risk - Most of the companies we buy are high-quality, large-capitalization companies. These securities move in and out of favor over time. Therefore, we believe risk is related to price, where the lower the price, the lower the risk and vice versa.

Historical Financial Characteristics - Finally, we believe that in a given ten-year time frame every major corporation goes through periods of being in vogue with Wall Street and some periods of being out of vogue. We further define a stock’s valuation by analyzing five financial ratios: price-to-book, price-to-sales, price-to-cash flow, price-to-earnings and dividend yield from high to low over this ten-year time frame.