Mid Cap Process

In the mid cap equity universe, the first step in our process is to screen all potential companies through our sector factors. These qualitative factors set us apart by focusing our attention on more productive industries while biasing us against the more accident prone or difficult to manage companies. There are specific factors for each of the five major sectors: for consumer we avoid fashion risk and focus on staples brands; in financials we avoid spread businesses and focus on niche opportunities; in health care we seek to minimize our exposure to government reimbursement risk and invest in technologies that improve outcomes; in industrials we look for innovators and/or problem solvers and avoid capital-intensive business; and for technology we avoid rapid product obsolescence, which leads us to the software industry and away from hardware. If a security passes this initial evaluation, it must then successfully pass the remaining two phases of our rigorous three-step research process, analysis of company fundamentals and valuation, to be included in the mid cap strategy. Once we have identified a security for purchase, we will be very patient in establishing a good entry point for the investment.