• We conduct extensive, independent, original research. This includes creating detailed, five-year models for each stock holding and analyzing balance sheets, cash flow statements, and income statements.
• Our Research team visits every business we own at least annually and thoroughly analyzes every aspect of the company, its industry and the competition.
• Tax efficiency – our average stock holding period of more than five years helps to reduce capital gains distributions.

In order to achieve our investors’ long-term goals, at the center of our research is a precise process we follow consistently – a repeatable pattern that guides us as we invest for lasting value. When we seek consistent high quality company stocks, we look for:

• Good businesses that we understand, have a competitive advantage and possess high profit margins.
• Companies that have little or no debt, free cash flow, and deploy capital wisely.
• Enterprises with superior management teams; leaders who are honest, ethical, energetic and have a strong track record of increasing the economic value of their organizations.
• Businesses we can buy at a discount to our estimate of economic value – this is our margin of safety.

• Determine if a business can achieve a 12%-15% annualized return rate over five to six years.
• Discount expected future cash flows to determine present value.
• Apply a “worst case” value baseline of no growth and discount at least 10%.
• Check against historical average multiples (price/earnings, price/cash flow, price/sales).

We sell a company’s stock when:

• The valuation is so high that the expected return falls below U.S. Treasuries.
• The valuation is well above long-term historical average multiples.
• The economics of the business are deteriorating.
• The investment is a mistake.