Our research process mirrors the value approach established by Benjamin Graham. We buy securities of businesses that are statistically cheap and trade below their intrinsic value.

We employ a wide range of resources and tools in our research effort. Ideas are generated from many sources, including database screens, Value Line reports, periodicals, and a knowledge base of companies that goes back more than 20 years. We may use street research to help us up the learning curve more quickly, but we rely upon our own internal analysis for the final decision. Studying company filings and reports, coupled with management interviews and discussions with competitors, rounds out our process.

We monitor 6,000 stocks and closely watch more than 250 others. Through screening of various databases, we apply traditional measures of valuation, seeking low price-to...

• Cash flow
• Sales
• Earnings
• Book value
• Dividends

Security selection decisions are driven from a bottom-up analysis, with a keen focus on a company's intrinsic value. We are attracted to companies that have durable economic characteristics such as low-cost production, industry leadership or a franchise quality to its brand. The companies we consider generate strong free cash flow, require low capital reinvestment, and produce high returns on capital. Qualitatively, we consider a company's competitive position, risk of obsolescence, quality of management, insider ownership, compensation structure, and other factors. We have an affinity for companies with significant ownership by management and appropriately structured compensation plans. The analysis is completed through company visits, discussions with competitors, and other qualitative business evaluations.

Companies that meet our quantitative and qualitative standards will be considered for purchase in the portfolio. Sell decisions are driven by changes in valuations, market conditions, or company fundamentals.