Process

We employ a three-step investment process, believing that a sound investment strategy must be founded on proven business principles that are applied consistently over time.  Our stringent risk control process is fully integrated into each step. 

  • Step One: Quantitative Screening.  We take the 50,000+ stock universe and narrow it down to approximately 200-300 securities by screening for liquidity and scale, reasonable valuations of earnings, cash flows, and assets, attractive historic returns on equity and assets, and lower levels of indebtedness.

  • Step Two: Qualitative Analysis.  With a manageable list of high potential investment candidates, we undertake a fundamental analysis of each enterprise’s competitive positioning, earnings growth, quality of accounting principles, business model and strategy, management’s ability to execute, the regulatory environment, and the economic landscape.

  • Step Three: Portfolio Construction. We believe that a very limited number of truly attractive investment ideas exist at any given time, that diversification of investment risk may be achieved with 20-40 holdings, and that thinking like an owner with a 3-6 year time horizon is the best way to exploit “long-cycle” opportunities.

Portfolio risk is mitigated by generally limiting exposure to any one company to no more than 8% of total account value (3%-5% at time of purchase), and no more than 25% of portfolio exposure to any one industry or country at the time of purchase. We will hold up to 25% cash in lieu of marginal investment ideas.