Process

We employ a two-stage process of analysis:

  • Step One: Quantitative screening based on numerous measures of price per unit of earnings, assets, and cash flows, market capitalization, balance sheet sustainability, revenue growth, margins, returns on assets, capital, and equity. We use these criteria to narrow the broad universe of roughly 10,000 investable stocks to approximately 200 which are then extensively analyzed on a qualitative basis.

  • Step Two: Qualitative analysis focusing on, among other things, the competitive nature of the enterprise's industry, trends in market share, revenue growth, earnings growth, regulatory environment, quality of accounting principles employed, management's ownership in the enterprise, the health of the economies in which the enterprise operates, and whether we grasp the business model and strategy of the enterprise.

The goal of these consecutive processes is to find portfolio holdings which not only meet value criteria, but which also have the potential for significant price appreciation over a 3 to 6 year period. We are mindful of "value traps", those situations in which a cheaply priced stock remains cheaply priced.  

Portfolio Risk Controls

  • Initial purchase weightings in the 3% to 5% range with parebacks to take profits or reduce exposure when a stock appreciates to the 6% to 8% range of the total portfolio.

  • Industry and individual country exposure limited to 25%, calculated on the cost basis of individual stock holdings.

  • Minimum market capitalization of $1 billion at the time of purchase with a strong inclination to skew our holdings to companies with market capitalizations in the tens of billions of dollars.