McBride: We're a team-oriented place. All of our research is reviewed by one of our six sector teams. These teams are flat in hierarchy. Everybody has dual roles; they’re usually either an analyst or a portfolio manager in the firm. They may be an analyst who covers stocks in that area, but everyone on the team is acting as a peer reviewer or devil’s advocate when a new investment idea or an existing investment idea is reviewed.
They debate the merits of all investments, question the analysts’ assumptions, all to come to a conclusion on a couple of important points—what’s the valuation for that particular company, and what’s the risk? We quantify both of those. On the valuation side, we use an estimate of normal earnings power or an estimate of fair value. And on the risk side, we have a proprietary system ranking risk by business quality, balance sheet, and governance.
Then it’s up to the portfolio managers to take that output and build portfolios. The portfolio managers are embedded on these teams, so we’re part of that review process.
Davis: The stability, tenure, and specialization of our staff further help that process. On the investment side, we have 26 people, each an industry specialist by nature, with an average tenure of 18 years. We have very low turnover. Having an in-depth understanding of companies and having seen them through many different cycles is a differentiator for us.