We use a five-step, bottom-up methodology to identify undervalued stocks in which to invest and monitor.

Step 1: Identification
Through a broad screening process, a company is identified as a potential investment. Companies considered for inclusion in the portfolios must have strong fundamental characteristics and meet certain revenue and earnings per share hurdles.

Step 2: Research and Analysis
Our research and analysis include:

•	careful assessment of the company and industry;
•	complete examination and analysis of financial and technical documents;
•	discussion with competitors, customers and suppliers.

Step 3: Valuation
Using information obtained from our research and analysis, we estimate the fundamental value of the company. A comparison is then made between the estimated fundamental value of the company and the company’s current stock price.

Margin of safety is of paramount importance. If an investment opportunity does not meet our margin of safety test, we will pass on it no matter how compelling it may appear.

Step 4: Investment Decision and Asset Allocation
A decision whether or not to make an investment in the company is made. Any potential investment must have the potential to deliver, on average, returns of at least 10% per year, above inflation.

If we decide to invest, an asset allocation policy is developed. Our asset allocation policy is shaped by two primary factors:

• risk; and
• estimated rate of return on the investment.

If we would like to make an investment at a lower price, we exercise patience by setting a target entry level and waiting for the opportunity to make a timely, yet thoroughly researched and carefully considered investment decision.

Step 5: Continuous Monitoring
We continuously monitor the various fundamental factors that affect the value of both existing and potential investments. This enables us to remain informed about any material developments and to make the immediate, yet well-educated decisions required.
We believe in a continuous approach to research that encompasses speaking with and analyzing information from multiple sources.