Without giving up too many trade secrets, here is a bit of information that we use to identify proper investments.

We generally only purchase individual securities. We may from time to time take advantage of Exchange-Traded-Funds (ie ETF’s). We do not use mutual funds at this time – we prefer to have our own ideas. Additionally, we feel that most publicly-traded mutual funds are too large and have too many internal costs to provide asymmetric returns to their owners. We may participate in Private Offerings if the thesis is good enough – if we ever do we will secure your permission prior to deploying any capital.

We Focus on Fundamental research: we will not deploy money unless we find a business we like. We will not simply do whatever everyone else is doing. We have our own ideas and while they may coincide with other investment firms, we stand by our ideas. Additionally, we attempt to purchase companies at the lowest possible prices. We may spend weeks or months buying such companies, and often we hope the prices decline so that we can buy cheaper.

Risk: As defined in our GROUND RULES, we view ‘risk’ as a shortcoming in our research. We cannot decide the volatility in a security’s price. We can decide how much we know about a company. We learn as much as possible as our portfolio companies to ensure a ‘margin of safety’. The below gives our investors an idea of how we select securites.

What we look for:

Capital Structure:

    1. Firm equity
    2. Firm Debt
    3. Potential Tax Implications
    4. Dividend/repurchase policies
Corporate Governance
    1. Board of Directors
    2. SWOT analysis
    3. Porter’s 5 Forces
    4. Past success with Mergers and Acquisitions
    5. What is the cost to us of Influencing in-place Governance
General Analysis
    1. General Ratio-Analysis using Balance Sheet, Income Statement, and Cash Flows Statement
    2. Earnings Reports and Transcripts of corporate disclosures.
    3. Top down analysis using ratios for industries and sector comparison. For international companies, we review financials of operations overseas independent of domestic operations (ie sum-of-parts analysis).

We also utilize Quantitative methods significantly (proprietary strategies that AUGMENT our selection process). To keep our overhead low, we have negotiated to receive these services as ‘soft dollars’ from our broker.


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San Diego, CA


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