Selection Criteria

High Current Income
Actively seek

  • High income yield is systematically underrated as a measure of value
  • Provides a consistent cash return on investment
  • Tends to dampen price volatility

Low Price
Actively seek

  • Potential return and income yield both rise as prices fall.
  • “Reversion to the mean” works in investors’ favor – most  stocks tend to overshoot on both the upside and the downside
  • Leads to a relatively high ratio of “winners” to “losers”

High Quality
Actively seek

  • High quality avoids major fundamental errors
  • High confidence in fundamentals leads to lower turnover and more accurate forecasting

High Growth
Generally Avoid

  • Many more companies are projected to produce above-average growth than actually deliver
  • The expectation of growth is usually accompanied by high prices and valuations – this can lead to disaster if expectations are not realized.