Markets are chaotic and influenced by emotion, particularly during times of financial turmoil when steady decision making is most critical. We maintain a consistent, disciplined and time-tested approach to investing which is relevant in all markets.

The central feature of our philosophy is the margin-of-safety principle. We invest in equity securities which possess both safety and value. Combining both characteristics offers the best protection against long-term loss, and enhances the potential for superior long-term performance.

We reject the efficient market theory (EMT), which states that security prices reflect all available information and that it is not possible to outperform the market via fundamental analysis. In fact, many “market anomalies” contradict EMT, yet financial academia continues to mostly embrace the theory as gospel. In particular, stocks selling for low prices relative to fundamental measures have historically outperformed the market. The “value” portion of stock indexes such as the S&P 500 and Russell indexes have outperformed the “growth” portion of the indexes, and the cumulative outperformance continues to grow over time.

We have a strong preference for businesses with strong balance sheets and are wary of financial leverage. The financial storm of 2007-2009 reiterated the importance of a focus on total company risk, rather than simply seeking companies which look cheap relative to normalized earnings.