We spend lots of time looking at companies that other people may think have poor prospects. Many of these opportunities are shrouded in fear, controversy, and uncertainty. These factors can distort market perceptions and increase the odds that a company’s current stock price becomes disconnected from its long-term business value. Our investment committee is most interested in the rare investment opportunities which combine an average or above average company with a discounted valuation relative to the market, competitors, or history. Regularly estimating the price ranges for which we are buyers and sellers of various businesses is just as important as researching the business fundamentals for companies and industries of interest. Price matters.


Careful business evaluation drives our decisions. Regardless of public perceptions, we keep our eyes fixed on the fundamental value of each potential investment. Our process is disciplined and time-tested. We think like business owners, carefully evaluating margin structure, growth potential, capital requirements and other key indicators.

We’re curious, independent thinkers. When a company of interest falls out of favor, we contemplate: Why? Are the issues facing the company structural or cyclical? If the management team made mistakes, what steps have they taken to rectify their errors? What market forces might improve or harm the company’s future in the near or long term? At what price would we be excited to own 100% of the company?

Our Buy Process has the following characteristics:

  • New ideas are driven by all members of the investment team, with a focus largely on company-specific, not sector-specific, opportunities.
  • Promising potential investments are assigned to an analyst for extensive review.
  • Analysts evaluate normalized earnings, free cash flow, and organic growth prospects using a variety of data which may include, but is not limited to detailed financial statement analysis, assessment of industry structure and competitive outlook, sell-side research, and conversations with management.
  • Once we’ve made our assessment of fair value, we compare it to the current market price. The goal is to identify companies which we believe offer the potential for annual total returns in excess of our absolute hurdle rate over the next three years (when we assume the stock will be fairly valued).
  • We examine not just a base case forecast, but also upside and downside scenarios. We ask ourselves if we would be comfortable holding a particular investment through the negative part of an economic cycle. If the answer is “no,” we generally look elsewhere.
  • We weigh the risk and reward of the prospective investment against current investments in the portfolio. We also use position sizing as a risk management tool.
  • Throughout the process, multiple viewpoints intensify the rigor of our thinking. Portfolio managers and analysts work independently to evaluate prospective investments. We then come together as a team to discuss and debate our conclusions.

As part of our Buy & Sell Processes, all investments are re-evaluated on a systematic basis to assess thesis consistency and continued risk/return opportunities. Our goal is to maximize the ratio of prospective return relative to risk across the portfolio, while at the same time being sensitive to tax implications.

Our Sell Process entails three categories of sales: (1) Winners – our price target has been achieved and the business is no longer undervalued, (2) Opportunity Costs – the business is still undervalued but selling is warranted to fund investments with superior risk/return characteristics, and (3) Losers – we determine our investment thesis was flawed and/or the risk profile of the company rises to unattractive levels.


Founder and CIO, J. Dale Harvey, has been successfully managing client portfolios for over 20 years using a consistent investment philosophy and process. Dale and each member of the investment team have well defined monthly research objectives for generating new ideas and monitoring existing investments. For instance, our portfolio managers and analysts perform a “clean piece of paper review” approximately every six months for portfolio holdings. The review evaluates recent trends relative to our original investment thesis and serves as the basis for a broader analysis of whether we should have more or less conviction in the investment thesis. During these discussions, we force ourselves to formally ponder whether we would still want to own the investment if we were creating the portfolio from scratch. While meaningful stock price moves can often accelerate company-specific updates, a formal six month review cycle facilitates a repeatable investment process.

This is test text at the bottom of the page to see if it sticks post-publish. 05/23.