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Our Value Equity Investment
Process
We identify appropriate stocks and build portfolios through a
rigorous four-step process:
1. Generate investment
ideas from carefully chosen research
sources. We use data from price and profitability screens,
corporate financials, and information from company and industry
meetings and presentations. We learn about companies'
products, profitability, plans and people during our assessment
of current positions and future prospects. Companies
exhibiting potential to improve returns on capital/equity
particularly attract our attention.
2. Build a case for a
particular holding by identifying reasons the
company may achieve or sustain above-average return on capital
and/or equity. We focus on changes that are likely to have
positive long-term effects on return on capital, such as:
- Improved margins and/or balance sheet,
- Better utilization of assets and cash flow,
- Changes in industry structure
and/or management team.
3. Assess the
attractiveness of current valuation of earning
power, including price/earnings ratios and dividend
yields-measures that have been proven for decades to produce
investment success.
4. Determine the
enhancement to the portfolio. The selection
should have a positive impact on the overall portfolio direction
and diversification. We add stocks to the portfolio to:
- Increase portfolio average earning power,
- Improve average valuation measures,
- Enhance overall diversification.
In addition to our four-step approach,
for identified tax-sensitive
investors, and at their direction, we:
- Identify positions with large gains or
losses,
- Determine gain or loss of each tax lot
associated with these positions,
- Execute trade to capture gain or loss,
- Reestablish position, as appropriate,
following 31 days.
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