Mid Cap Process

In the mid cap equity universe, the first step in our process is our sector factors, a set of qualitative judgments that 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.