Investment Process Summary

Stage 1


Stage 2

Fundamental Analysis

Stage 3


Stage 4

Self Discipline

Stage One: Qualification

  • Identify Opportunities - Dividends above the Market Average - Market Cap > 5B
  • Screen for companies with near term challenges offering long-term value
  • These companies now become our Followed Opportunities.

Stage Two: Fundamental Analysis and Determining Fair Value

(Hover over images to learn more)

Attractive Business

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?


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


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.


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.

Company Management

we want to partner with

  • Management with exceptional skill, integrity, and passion
  • Treat shareholders like partners
  • Indifferent to Wall Street’s short term focus
  • Lean corporate culture fosters independence, accountability
  • Compensation rationally determined


what we look for in a business

  • High Return on Equity, Return on Capital, and Strong Free Cash Flow
  • Identifiable, sustainable competitive  advantages
  • Pricing power in excess of costs, inflation protection
  • Easy to understand
  • Strong balance sheets
  • History of portfolio company  management  behavior during difficult economic conditions, difficult operational issues
  • An emphasis on “All-Weather Businesses”

Stage 4: The DISCIPLINE to Sell

When selling makes sense

  •  Price Appreciation - The price reaches our appraisal and no margin of safety remains
  • Superior Risk/Reward Elsewhere - We can improve our risk/return profile substantially. For example, we can replace a business selling at 90% of its worth with an equally attractive company trading at 50% of its value
  • Eroding Fundamentals - The future earnings power of the company becomes severely impaired by competitive threats, balance sheet deterioration, or poor capital allocation
  • Loss of Confidence in Management - We no longer believe management can build shareholder value and efforts to find new corporate leadership would be unsuccessful or too costly
  • Dividend - is reduced substantially or cut