Eight Investment Criteria
Building Portfolios on an Investment Discipline
Our portfolio managers evaluate and purchase stocks based on the following Eight Investment Criteria:
Required over the entire holding period
1) Meets an economic need
2) Strong competitive advantage (wide moats or barriers to entry)
3) Long history of profitability and strong operating metrics
4) Generates high levels of free cash flow
5) Available at a low price in relation to intrinsic value
Favored, but not required
6) Management's history of shareholder friendliness
7) Strong balance sheet
8) Strong insider ownership (preferably with recent purchases)
Every company we own must satisfy the required criteria. For companies that do not also meet the favored criteria, we believe these short-term conditions will be ultimately corrected or overwhelmed by the required criteria.
Sell Criteria
Companies are sold if they deviate significantly from these criteria or if their stock price becomes unreasonable due to dramatic price appreciation in relation to underlying fundamentals. When a security falls 15-20% from our purchase price or relative to a peer group, the portfolio managers execute a formal, intensified review.