Highest Quality Companies

1. Sustainably Growing

We prefer to invest in companies with double-digit earnings growth. Slow revenue growth, sooner or later, results in slow earnings growth and often precedes earnings declines. Our goal is to invest in businesses during their most productive years, which can often be decades, but these terrific growth years seldom last indefinitely

2. Non-Cyclical

We generally require companies to have non-cyclical business models, multiple product lines and national or multi-national footprints. Businesses with these traits have more predictable earnings power, the ultimate driver of shareholder returns.

3. Conservatively Capitalized

We look for businesses that have well below "average" debt to total capital ratios for their industry and preferably no long-term debt. It is difficult for us to overstate the importance of finding companies that have controllable financial and operational leverage.

4. Uniquely Profitable

We seek highly profitable companies with returns on invested capital that are significantly higher than the average level for their industries and well above average for all companies. Developing a consistent long-term growth record through economic cycles is important proof of a company's sustainable competitive advantage and ultimately its earning power.

5. Genuine Earners

Our investment professionals are most concerned with real earnings- cash that each company can use to expand its business or pay out in dividends. In that vein, we measure and capitalize our own version of'cash earnings' and pride ourselves on understanding the nuances of U.S. GAAP and international accounting standards.

6. Well-Managed

While a company's record often implies excellent management, our analysts' subjective view of management is crucial as well. After decades of practicing the art of investing clients' capital, we still find that answering one subjective question has helped us avoid trouble: Do we want to be in business with this management team?

7. Large and Liquid

We invest in companies with larger market capitalizations, as we value having a highly liquid investment portfolio. While our portfolio turnover is low by all standards, we want to be able to enter and exit positions freely regardless of market conditions. Similarly, we believe our clients should have daily access to their capital.

8. Businesses that Create a Positive Overall Impression

We have found over the years that when the overall impression gathered while researching a company, meeting its management, competitors, suppliers and customers leaves us feeling 'proud to be a shareholder' we get better investment results.