|
Security Selection: Wearing our
hats as "value" investors, we typically have little
difficulty in finding stocks that meet our criteria in eight
of the sectors; achieving full representation in the remaining
three requires that we think more like
investors.
In the "value" segment
of portfolios, we look for:
- Stocks in industries and businesses that we can analyze,
that cannot be devastated by a single external event and
that do not have "fad" characteristics.
- Stocks that have declined substantially from recent highs,
reflecting a combination of low expectations on the part
of investors and, often, adversity related to the economy,
industry or company.
- Low valuation levels relative to shareholders' equity,
cash flow, earnings and dividends, in comparison both to
other stocks and to the history of the security in question.
- Above-average dividend yields (a smaller component of
total return thus needs to come from capital appreciation,
which intrinsically is less predictable).
- Strong balance sheets relative to the norms for an industry,
in order to provide an enhanced level of confidence in the
dividend and in the future stability of the company.
- Foreign exposure, largely through ownership of U.S. companies
with substantial international operations.
|
