INVESTMENT PHILOSOPHY

We are disciplined value investors. That is, we focus on stocks that are inexpensive on a price to earnings (P/E) and price to book (P/B) basis. Within this universe we are looking for stocks that have a catalyst that we believe should result in stronger than average earnings growth over the next few years. While our philosophy is based in large part on our experiences, we were also influenced by the advice of the legendary Ben Graham, who gave a speech in the mid-1970s summarizing his 50 years in the investment business. His view was that if you followed two simple principles, you would not only do well but would outperform most other strategies. The first principle he stressed was using an investment discipline of not overpaying for one's stock, since that is the Achilles heel of the investment business. The disciplines he recommended were P/E, P/B, and dividend yield. He explained that this should get you halfway there. The second principle he stressed was to be a long-term investor. Graham pointed out that markets on a one or two years basis can be completely unpredictable. However, if one takes a longer-term view, i.e., five years, the investor should have enough time to potentially benefit from earnings and fundamentals rather than emotions like panic, fear and greed.

Taking Graham's advice, we did academic studies showing the advantages of a) buying the lowest P/E and P/B stocks and b) being a long-term investor. We studied the bottom 20% of the S/P 500 on a P/E and P/B basis. Specifically, we calculated returns that would result if one held the bottom 20% of the S&P 500 for a year, then rebalanced to the bottom 20% and did this each year for the entire 40-year period. The results of our study were spectacular. Investors in this hypothetical scenario would have been rewarded with a 50% edge over the market when using a P/E and P/B basis and received a 30% edge for buying the top 20% on a dividend yield basis. The tricky thing was that yearly performance was all over the place. To deal with this volatility, we listened to Graham's second piece of advice to be a long-term investor. We calculated the performance for the lowest P/E stocks and took their annualized rates of return for each of the rolling five-year periods for the 40 years being studied. Interestingly, there were no negative returns for any five-year period, the message being that a good way to address risk is to be a long-term investor and to invest with a price discipline.

Mutual fund investing involves risk. Principal loss is possible. The Fund invests in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. The Fund invests in medium capitalization companies, which involve additional risks such as limited liquidity and greater volatility.

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	INVESTMENT PHILOSOPHY We are disciplined value investors. That is, we focus on stocks that are inexpensive on a price to earnings (P/E) and price to book (P/B) basis. Within this universe we are looking for stocks that have a catalyst that we believe should result in stronger than average earnings growth over the next few years. While our philosophy is based in large part on our experiences, we were also influenced by the advice of the legendary Ben Graham, who gave a speech in the mid-1970s summarizing his 50 years in the investment business. His view was that if you followed two simple principles, you would not only do well but would outperform most other strategies. The first principle he stressed was using an investment discipline of not overpaying for one's stock, since that is the Achilles heel of the investment business. The disciplines he recommended were P/E, P/B, and dividend yield. He explained that this should get you halfway there. The second principle he stressed was to be a long-term investor. Graham pointed out that markets on a one or two years basis can be completely unpredictable. However, if one takes a longer-term view, i.e., five years, the investor should have enough time to potentially benefit from earnings and fundamentals rather than emotions like panic, fear and greed. Taking Graham's advice, we did academic studies showing the advantages of a) buying the lowest P/E and P/B stocks and b) being a long-term investor. We studied the bottom 20% of the S/P 500 on a P/E and P/B basis. Specifically, we calculated returns that would result if one held the bottom 20% of the S&P 500 for a year, then rebalanced to the bottom 20% and did this each year for the entire 40-year period. The results of our study were spectacular. Investors in this hypothetical scenario would have been rewarded with a 50% edge over the market when using a P/E and P/B basis and received a 30% edge for buying the top 20% on a dividend yield basis. The tricky thing was that yearly performance was all over the place. To deal with this volatility, we listened to Graham's second piece of advice to be a long-term investor. We calculated the performance for the lowest P/E stocks and took their annualized rates of return for each of the rolling five-year periods for the 40 years being studied. Interestingly, there were no negative returns for any five-year period, the message being that a good way to address risk is to be a long-term investor and to invest with a price discipline. Mutual fund investing involves risk. Principal loss is possible. The Fund invests in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. The Fund invests in medium capitalization companies, which involve additional risks such as limited liquidity and greater volatility. Home / Terms & Definitions / Privacy Policy / Disclaimer