Stocks represent fractional ownership in real businesses. We do not regard them as mere pieces of paper or speculative wagers. Our investment process emphasizes fundamental research, using both quantitative and qualitative techniques.
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Track Company Earnings and Stock Prices
Our portfolio managers and research analysts track earnings information and stock prices on several hundred companies.
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Identify Long-Term Trends
While we research companies on a case-by-case basis, we also attempt to define broader, long-term trends that influence the potential for certain companies to create value over the long term. Thus our method, while predominantly bottom-up, incorporates a top-down element as well.
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Fundamental Research
Our portfolio managers and analysts conduct extensive research into company fundamentals, reviewing financial statements and regulatory documents.
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Interview Company Management
We insist on interviewing the executive management teams, employees, clients, and competitors of prospective companies.
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Value Discipline
Davis applies a proprietary method for calculating the intrinsic value of a business, based on a company's "owner earnings." Owner earnings are determined by adjusting reported net income to more accurately reflect the true cash profits of a business. Positions are built strategically when shares of companies can be purchased at discounts to their intrinsic value.
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Long-Term Investment
We consider selling an investment on the basis of deteriorating fundamentals, a negative change in management or strategy, or excessive valuations.
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