We believe that cash flow is the best measure of corporate performance and the best measure of the true economics of a business. In our view, the market pays for the change in cash flow rather than the level of cash flow. Therefore, we search for companies that are improving their cash flow rate of return. In addition, we pay close attention to the valuation paid for our equity holdings. We concentrate on quality companies with solid balance sheets led by management teams that have shown the ability to create long term shareholder wealth.
Equity holdings are selected from a universe of midcap and largecap domestic companies. Given our lengthy experience in smallcap equity, we may add smallcap exposure when it fits with a client’s risk profile.
Portfolios consist of 35 to 50 equity holdings diversified across market sectors and industries that have historically shown the ability to create long-term shareholder wealth.
We believe that shareholder wealth is created through the long-term ownership of growing, profitable businesses. When initiating a new position, we ask ourselves if we can own this business for a minimum of three to five years. We are long term investors, not traders.