Five Step Approach

Our ultimate goal is to select for our portfolios companies that we believe have superior businesses, are capable of sustaining above market growth rates, and whose potential value is not already fully reflected in the company’s stock price. Our approach combines bottom-up fundamental research with macroeconomic and demographic trend analysis to evaluate and choose investments. While we do not try to anticipate short term market movements, we do consider the trading and investment trends of the market prior to making investment decisions.

We employ a five-step strategy when constructing portfolios, buying and selling investments, evaluating our historical performance, and assessing the risks inherent to equity investing.

Our Five Step Approach

Step 1:
We identify investment themes of potential interest. This entails a thorough analysis of short- and long-term macroeconomic trends, including a top-down economic review, demographic factors and industry influences affecting sector growth rates. It also involves frequent visits with senior management, as
well as attendance at trade and brokerage research conferences.

Step 2:
We find superior companies. To achieve this,
we perform further research that measures potential companies for investment against 11 specified characteristics. The criteria for a company to be included in our portfolios are extremely stringent. Out of the thousands of potential companies for investment in the United States, we are looking for only 30 to 60 to
be in our portfolio at any given time (25 to 40
in the Small Cap).

Step 3:
The third step is to construct a portfolio. We continually track 150-200 mid-sized and small U.S. companies that meet our criteria. In-depth, detailed research helps to prevent mistakes, and as a result our portfolio turnover is relatively low.


Step 4:
The fourth step is to re-balance the portfolio periodically. Judicious adjustments can help to manage portfolio risk by limiting overexposure to any one sector or issue.

Step 5:
The fifth step is to give considerable attention to our sell discipline, because often the sale of a stock is as important to portfolio performance as the original purchase.