Equities

 We believe it is essential to long-term investment success to not restrict the universe of equity opportunities. We are strong adherents that rewarding investments can be found in a variety of geographic areas, diverse industry groups, and within all capitalization categories. Consistent with this doctrine, we believe that appropriate diversification among sectors and industries and a strong emphasis on such quantitative factors as balance sheet strength and free cash flow aid in limiting risk in an equity portfolio. We emphasize current valuations on a company-by-company basis in conjunction with prospective growth in earnings and dividends and the possibility of assets, such as new products or technologies, being under-recognized by others.

 Our experience convinces us that successful equity results are best achieved by focusing on a limited group of companies which can be given close and continuous attention. Our emphasis is on the leading companies in sectors having the best three-year growth prospects within the framework of economic, financial, and societal conditions. In addition to sound balance sheet structures, earnings momentum and margin improvement are critical. We prefer managements to have meaningful holdings in their companies to reflect their entrepreneurial spirit and a partnership with outside investors. Operating dynamics are of the utmost importance, but they must always be subjected to valuation disciplines appropriate to existing market conditions and the characteristics of specific industries and economies. 

Finally, it is essential to have an understanding of broad economic and fiscal trends when constructing an equity portfolio. Changes in monetary policy and tax and regulatory procedures will often have a meaningful impact on decisions relating to individual stock selection and total equity allocations; and, changes in economic priorities and directives may result in differing sectoral opportunities and risks.