Philosophy

There is a strong correlation between above-average investment performance and error avoidance. To achieve long-term success, an investor must first consider downside risk before considering the potential for appreciation.

A company’s stock price often falls below its private market value due to temporary problems such as missed earnings estimates, over-reaction to short-term results or overall negative market psychology. These short-term deviations may present viable opportunities for the patient, long-term investor.

Excess cash flow is the lifeblood of a business and is the primary determinant of a company's private market value. Companies that generate excess cash flow have the potential to enhance shareholder by increasing dividend payments, repurchasing company shares, reducing outstanding debt, engaging in strategic acquisitions, on withstanding economic downturns without adopting harmful short-term strategies.

Forensic analysis of financial statements reveals the Quality of a company’s Earnings, the success of its strategy, sustainability of its performance and impact of management decisions on future cash flow. Forensic analysis of financial statements is more useful to an investor than management forecasts or earnings guidance.

Emphasizes investments in undervalued equity securities of companies with discernible financial strength, unique business fundamentals, competitive edge and ability to generate free cash flow

Analysis focuses on how a company’s operations generate sustainable free cash flow; how much of that cash is available to investors and the level of ongoing investment required to maintain and grow free cash flow

Valuations based on free cash flow. Reliable valuations require determining if a company’s accounting policies reflect business reality; assessing a company’s Quality of Earnings; accounting adjustments to eliminate management bias, and identifying positive or negative factors that may affect future free cash flow