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we are primarily concerned about a sustainable
catalyst that will propel the stock price |
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the catalyst can be related to valuation and
we generally look for companies priced below their intrinsic
value |
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a reasonable valuation should be accompanied
by a stimulus for growth |
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the growth catalyst can be an external factor
like regulatory change or an internal factor like a key management
hire |
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 "Main
Street" market trends and investment themes influence our
process |
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10 percent of our efforts are directed at identifying
long-term societal trends |
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an example of a potential long-term trend could
be the U.S. seeking energy self-sufficiency |
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if we can discover those trends before the market, they will
help drive growth when the market recognizes the opportunity |
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trend-related investment themes help us focus
our company research efforts on specific areas of the market |
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 We
also look for industries that are going through a positive change |
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10 percent of our efforts are focused on sector
and industry screening |
|
our initial screen ranks industries that have underperformed
the market for the last year, but have higher projected earnings
growth than the market
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the next screen measures how the industry has historically
been valued versus other industries |
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those screens and several others help to identify
industries that may perform well relative to their peers
over a sustained time period, like technology in 1998 or
oil and gas in 1999
|
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 Individual
company research is the cornerstone of our investment process |
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80 percent of our process evaluates individual
companies |
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less information is available about smaller companies so
detailed analysis can provide an information advantage relative
to other investors |
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we look for "Baby Blue Chips" that
are dominant in a distinct business niche |
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we will make a purchase if the stock is a high quality
business trading at a compelling valuation with a growth
catalyst that will propel both the earning acceleration and
market recognition 18 months out
|
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We
pick small companies, but we don't confine ourselves to value or
growth
