- Joseph Lai, CFA/Chief Portfolio Manager -

Our investment process begins with the development of an investment policy statement. The investment policy statement provides the framework for the formulation and implementation of an appropriate investment strategy. We conduct a comprehensive evaluation of a client’s financial situation to determine investment objectives, risk tolerance and investment constraints, such as tax considerations, liquidity needs and time horizon. A properly developed investment policy is necessary to determine appropriate asset allocation and promotes long term discipline. The investment policy statement also helps clients better understand their own financial goals and constraints.

The ability to select securities, which offer the greatest potential to appreciate in value and/or fulfill our client’s income requirements, is vital to our success. Our securities selection is a demanding process.

We follow several pathways to generate new investment ideas as well as to maintain constant surveillance of securities held in clients’ portfolios. We receive primary research material from several prominent Wall Street investment firms as well as from other well recognized industry sources. In addition, we maintain our own extensive library of research information, corporate reports and industry data relevant to our present or potential investment interests. Possible investment ideas that we identify through our own efforts are crosschecked with investment information and opinions obtained from our primary sources. Conversely, recommendations by our primary sources that are consistent with our investment preferences are reviewed by our own analysts and only those deemed exceptionally attractive are considered for purchase.

We seek to identify companies that we believe: (1) Provide superior products or services; (2) Are market leaders or efficient competitors; (3) Are profitable or have the potential for profitability; (4) Possess a high-quality management team; (5) Have strong financial characteristics; (6) Have sustainable above average growth and earnings predictability. It is our belief that companies that possess these strengths provide the best potential for long term investment. We also seek to identify companies poised for growth that have attractive valuations, in addition to the financial strength and management capability needed to deal with rapid expansion.

We focus on companies that we believe are undervalued, or at least reasonably valued relative to the market based upon their strengths and projected earnings growth. Generally, we are reluctant to pay a premium for the companies in which we invest. However, certain stocks with price-earnings ratios equal to or above the market, as a whole may also be attractive if predictable high growth rates appear to justify premium valuations. Such stocks generally outperform the market due to their strong earnings momentum.

We believe that a well-managed portfolio requires moderate, rather than excessive, diversification. A moderate degree of diversification enables us to reduce risk without having too many positions to effectively manage. We diversify our portfolios across those industries that we believe have the best intermediate and long-term growth prospects. Despite periodic volatility abroad in dollar terms, we believe a moderate amount of international portfolio diversification can, at times, increase total long-term returns due to rapid economic growth in many foreign countries. Although we do not always hold foreign securities in clients’ portfolios, we recognize that there can be significant investment opportunities in markets outside the United States. One way in which we take advantage of international opportunities is to invest in U.S. based, multinational companies, many of which derive a significant portion of revenues and earnings from foreign sources.