If a company survives the rigorous quality/internal research process, then its value (in terms of stock price) is calculated at various required rates of return.  We believe that the intrinsic value of any business is determined by the cash flow that the business will generate over time.  

Valuation is determined using a consistently applied valuation model driven by data gathered during our own internal research process.

• 10-year discounted cash flow model employed based upon various income statement and balance sheet assumptions 
• Model assumptions made with a conservative bias
• Model updated regularly as part of maintenance research process

To buy a company’s stock, the expected rate of return must exceed the riskless rate (Intermediate Treasury) by 600 basis points.

An enhanced rate of return expectation can be triggered by:

• A stock price temporarily depressed due to a short-term or fixable problem
• A company with a more favorable outlook than consensus view

Opportunistically adding to an initial position is the typical acquisition pattern.

Existing stock holdings will be sold if the expected rate of return narrows to less than 200 basis points over the riskless rate (Intermediate Treasury) or if the thesis for investing in the stock is invalidated.

A reduced rate of return expectation can be triggered by:

• A stock which has appreciated rapidly, outpacing the underlying growth assumptions
• A change in our assessment of company's long-term fundamental prospects