SELECTION

PROCESS

A

pproach

We apply a disciplined approach to evaluating, selecting and monitoring managers. Our selection program is composed of multiple in-person office visits.

Each manager must meet a list of standards that includes clear evidence of a disciplined investment making decision process.

We conduct extensive due diligence on valuation, portfolio management, investing principles, fundamental research, and risk management.

How We Do It

01

MULTIPLE VISITS

We are patient and very good listeners. We visit each of our managers multiple times in person evaluating front and back office operations before taking them on.

02

IDENTIFY INCONSISTENCIES

The in-person visits allow us to identify changes and inconsistencies in the managers' strategy and their securities over a long period of time. It also allows us to cross check each of them in a number of different ways.

03

INTEGRITY

On subsequent visits, we learn who these managers talk to outside their own organization, both clients and investment idea sources. We exam their infrastructure, compliance, and administrative procedures.

DUE DILIGENCE

aluation

V

We expect our managers to determine the intrinsic value of a company as best as one can and actively seek securities they believe the market has undervalued.

We prefer our managers to hold a concentrated portfolio. We also like managers that hold cash while they wait for an opportunity to arise. Additionally, there should be a higher concentration of small and mid-cap companies as they historically present the greatest inefficiencies.

ortfolio

Management

P

nvesting

Principles

I

We expect our managers to purchase securities that are both inexpensive relative to their intrinsic value and have improving fundamentals, resulting in portfolio's that have a better risk/reward profile.

The fundamental analysis process must result in a clearly defined defensible intrinsic value for every candidate company and security. Each company's whole capital structure should be analyzed to identify the cheapest security within the structure.

undamental

Research

F

R

isk

Management

There must be a risk monitoring and management program independent of the portfolio manager. Small firms find it difficult to separate risk management from portfolio management. In these cases, we must thoroughly understand the process.