Step 2: Establish An Economic Valuation
Our valuation process emphasizes two key factors. First, we focus on free cash flow generation. Second, we value a company as if we were acquiring the entire business.
The valuation techniques we use are truly traditional; they are grounded in long-standing corporate finance principles that are more often used by private equity and M&A professionals when evaluating a company. Our research is based primarily on the review of publicly available documents filed with the SEC and interviews with management, competitors and customers. Numerous meetings with its principal officers are an integral part of our review of the company’s operating and financial conditions.
Reflecting our bottom-up fundamental analysis of companies, the sector and industry weightings of our portfolios are exclusively a by-product of our stock selection process and the conviction of our portfolio managers. Ultimately, stock selection is the investment decision that adds the most value to clients’ portfolios.