Investment Process

We invest in industry leading, time-tested companies at sensible prices — large capitalization, U.S. companies in vital industries whose business, profit models and balance sheets are transparent and able to be analyzed and evaluated. Much of successful investing is buying the right companies at the right price.

Of equal importance is knowing which companies and industries to avoid where the risks are not easily understood. We look for bargains and opportunities with the highest quality companies in which we understand all the ingredients. We are optimistic about the companies we own, but at the same time, always cautious.

We perform a rigorous financial screening process that requires our companies have:

• 20+ year track records of creating shareholder value
• Discounted or very attractive price-to-earnings ratios relative to the market and their peer group
• High cash flows and low debt ratios relative to industry averages and their peers
• A history of increasing dividends
• Highest safety and financial strength rankings

We perform a rigorous moral screening process that examines:

• Industries
• Business practices
• Financial practices

We will not invest in any company whose business or financial practices we find morally objectionable. We want
to be proud of the companies that we own and what they stand for.

In summary:
Our approach allows us to focus on 25 to 40 equity holdings at any given time. Because we are judiciously
opportunistic and also looking to protect against the downside, we may at times hold significant positions in U.S. Treasuries, precious metals and cash.