Investment Process Summary
Stage 1
Qualification
Stage 2
Fundamental Analysis
Stage 3
Patience
Stage 4
Self Discipline
Stage One: Qualification
Stage Two: Fundamental Analysis and Determining Fair Value
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Attractive Business
Substitutes?
Existing Competitors?
New Competitors?
Pricing Power?
Power of Suppliers?
Business Financials
Solid Balance Sheet?
Strong Free Cash Flow?
Strong Management
Capable Operators?
Shareholder Oriented?
Proper Incentives?
“Sum of Parts” Analysis
The sum-of-the-parts analysis helps understand the intrinsic value of a company. What is the fair value?
Dividend
Is the Dividend Safe?
Will the Dividend Grow?
What is the total return potential?
Discounted Cash Flow Analysis
What is the value of a company based on our analysis of the future cash flows discounted to a present value?
Graham’s “Margin of Safety” Definition
A margin of safety is achieved when securities are purchased at prices sufficiently below their underlying fair value to allow for short-term volatility prior to the market agreeing with our assessment.
Stage Three: Patience
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Assess and Monitor Fair Value
We seek to initiate positions at a significant discount to our determination of fair value, focusing on long-term valuation and ignoring benchmarks.

Risk Control
We define "risk" as the probability of the permanent loss of capital not price volatility. We believe in concentrating our portfolio in our most attractive investment ideas, which can cause short-term price volatility. It is important to note that no one issue accounts for more that 5% of the portfolio assets on the cost side; and no one industry group accounts for more than 20% of the portfolio's value on the cost side.

Cash
Importantly, our patient approach to portfolio construction often necessitates we hold cash. In our mind, this is not ideal, as our goal is a fully-invested portfolio of world class investments. However, we adhere to the time tested philosophy, as taught by Benjamin Graham, of buying fractional shares of a business at discounts to their intrinsic values. As a result, if there are no cheap stocks, we patiently wait.