We seek to buy high-performing companies at what we believe are bargain prices. We are interested in those companies who most efficiently generate cash on the resources they put to work, and who are undervalued relative to peers. We are looking for strong performers priced below their intrinsic value due to short-term market fluctuations.
In our view, a company should be evaluated as to how efficiently it can generate cash, the reliability of its returns, and—most importantly—on how much it costs.
We focus our performance analysis on cash flow rather than earnings, which are often manipulated by company management to distort true performance. We invest in large dividend-paying companies, as they tend to be more stable during periods of market volatility. Only stocks that meet minimum requirements for market cap and dividend yield are included in our universe.
We evaluate companies on a relative basis using a series of rank orders, seeking to highlight those companies offering the best relative combination of high performance and low price. Separate performance and valuation rankings are combined and used to build our equal-weight equity portfolio.