INVESTMENT PHILOSOPHY
(continued)

Definitions of value investing can change with the markets and decades. Twenty-five years ago the classic value investor tended to look for under-priced tangible assets and relied heavily on book value as a measure. Today, a well-run company might be an attractive investment if it has substantial intellectual property and proprietary services and focuses on return on investment as a goal.

Certain key characteristics that may make a company a candidate are:

• Leading competitive position.
• Expanding product line and or pricing power.
• Excellent research and the ability to introduce new products and services.
• Proven quality management.
• Strong balance sheet reflecting internally financed growth.

Unrecognized intrinsic value and potential in a company, we think, can come from a variety of sources, including a proprietary product, new management, low visibility, or a sector of the market that is temporarily out of favor.

Fundamental research is an important resource for any money manager. Klingenstein, Fields & Co.'s investment decisions are supported by internal research, company management meetings, independent boutiques and traditional "sell side" Wall Street research. We also give important weight to the proven investment expertise of our Members. Typically, we allocate a portion of most client portfolios to short-term investments as a reserve for future purchases providing appropriate flexibility to respond to changing market conditions.

Our sell discipline is equally important and rigorous. We would sell if valuations are unreasonably high relative to long-term projections, or a company's long-term prospects have deteriorated, if the primary reason for the purchase has changed or, in the case of opportunistic investments, there is full reflection of value.

Within this investment framework, each client has his portfolio customized and tailored to his specific needs for income, appreciation, risk level, tax consequences, estate planning, planned intergenerational giving, charitable contributions and other individual considerations.

<< Previous