Stocks represent fractional ownership in real businesses. We do not regard
them as mere pieces of paper or speculative wagers. Our investment process
emphasizes fundamental research, using both quantitative and qualitative
techniques.
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Track Company Earnings and Stock Prices
Our portfolio
managers and research analysts track earnings information and stock
prices on several hundred companies.
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Identify Long-Term Trends
While we research companies on a
case-by-case basis, we also attempt to define broader, long-term trends
that influence the potential for certain companies to create value over
the long term. Thus, our method while predominantly bottom-up
incorporates a top-down element as well.
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Fundamental Research
Our portfolio managers and analysts
conduct extensive research into company fundamentals, reviewing
financial statements and regulatory documents.
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Interview Company Management
We insist on interviewing the
executive management teams, employees, clients, and competitors of
prospective companies.
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Value Discipline
Davis applies a proprietary method for
calculating the intrinsic value of a business, based on a company's
"owner earnings." Owner earnings are determined by adjusting reported
net income to more accurately reflect the true cash profits of a
business. Positions are built strategically when shares of companies can
be purchased at discounts to their intrinsic value.
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Long-Term Investment
We consider selling an investment on
the basis of deteriorating fundamentals, a negative change in management
or strategy, or excessive valuations.
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