Melding Fundamentals and Valuation to Produce "Margin of Safety"
The concept of "Margin of Safety" is the cornerstone of our investment philosophy. We buy out-of-favor stocks which are poised for fundamental improvement, and trading at attractive valuations. We strive to build a margin of safety into both sides of the fundamental and valuation equation. By focusing on stocks which are out of favor, we reduce the risk of fundamental disappointment that will drive the share price down sharply. By purchasing stocks at low valuations, we maintain a safety net while waiting for the fundamentals to turn positive and be recognized by the market. Our portfolios are positioned for the next two years, not the next two months, two weeks or two days. We believe this approach will generate favorable risk-adjustment returns over the long term.