Flippin, Bruce & Porter employs a Value, bottom-up, large-cap, fundamental, equity approach with decisions made by looking beyond current investor emotion, discounting Wall Street expectations and then relating historical financial company characteristics to current price. History shows that over 10-year time periods large domestic corporations go through periods of being in favor and out of favor. With this belief as a backdrop, our discipline identifies securities which are trading at the lower end of their historical ranges. In addition to our valuation work, we employ a well-defined, systematic, fundamental analysis which identifies catalysts which we believe will cause fundamentals to improve. By combining solid value and improving fundamentals, coupled with judging investment sentiment, FBP believes our process will yield successful results in the future.

What Makes Our Approach Different

We are Value Managers - To us, our approach is the purest form of value management. FBP believes strongly that investors overreact to both optimistic, as well as pessimistic news. Understanding this factor is key to successful investment management.

Our approach to historical valuations - At FBP the valuation segment of our research effort focuses on five historical ratios, not just one or two. We begin with ten years of history in analyzing the following: sales, book value, cash flow, earnings, and dividend yield. We believe using five factors allows us to make better judgments as to investment merit.

We study investor sentiment - This effort gives us insight into institutional owners and their enthusiasm, or lack of, toward specific issues. We are trying to uncover unwarranted pessimism and our sentiment work is important in this effort as it leads to value opportunities.

Investment team structure - The ability to maximize investment talent is crucial to a successful investment process. At FBP our structure is designed to promote individual input - within a team approach. This makeup gives us the ability to draw out our best thinking relative to our investment ideas.

Our 3-to-1 reward vs. risk ratio - This is a characteristic which we believe is unique to our investment process. After three price targets are set (downside - fair - full), a security candidate must meet our 3-to-1 reward vs. risk test for initial inclusion into our portfolio. Specifically there must be three times the upward potential to the fair target as there is of downward potential to the downside target.