We believe that superior investment returns are found at the intersection of Quality, Valuation and Risk (QVR).

QVR Ranking

Each factor is rated individually and then combined to develop a Total QVR Ranking between 10 (best) and 1 (worst). The most attractively ranked companies are candidates for inclusion in our portfolios.

Specifically we review:

Quality Ranking

We look for companies that have all the necessary factors to produce sustainable or cyclical growth. We focus on growing businesses that also have strong underlying profitability and that evidence superior financial and management strength. From these inputs, each company receives a Quality Ranking.

Valuation Ranking

We also look for companies that carry attractive valuations, along with quality in the underlying business. Individual securities are evaluated compared to the company's:

• historical valuations
• industry valuations

From these inputs, each company receives a Valuation Ranking.

The Valuation factors we review include:

• P/E
• P/cash flow
• P/book

Risk Ranking

Risk management is a strong thread that underlies our entire investment philosophy and process. A Risk factor is developed and applied to each security, based on both qualitative and quantitative assessments. From these inputs, each company receives a Risk Ranking.

The Risk factors we review include:

• earnings variability
• earnings dispersion
• management risk
• financial risk
• industry/business risk
• valuation risk
• growth risk

Combined QVR Score

Each QVR factor - Quality, Valuation, Risk - is assigned a score out of 10. They are then weighted and an overall QVR score is calculated. Stocks with high-rated QVR scores are eligible for inclusion in our portfolios. Most stocks are rated from 2-8 based on our calculation method.