We look first for durable companies that we believe have bright prospects and limit our investments to those that pass our rigorous tests. Only after this assessment positively identifies an investment opportunity do we work to establish what we believe is a reasonable estimate of the company’s intrinsic value. We then require the stocks we add to our portfolio to be trading at a substantial discount to our estimate of that intrinsic value.
We do extensive fundamental research to identify companies with these characteristics. The attributes we look for include strong and durable competitive advantages, high and sustainable returns on invested capital, competent and shareholder oriented management, long term growth opportunities, and sustainable levels of debt.
In determining whether a particular company may be a suitable investment, we examine:
The focus of our investment process is in identifying the small number of companies that we believe have the ability to potentially produce a relatively predictable stream of cash flow generation. It is these companies that we believe we have the capacity to make a reasonable estimate of their intrinsic value and therefore identify those times when the market price of their stock offers a compelling investment opportunity.
While we believe we can identify these relatively rare companies, we also acknowledge that the large majority of companies have relatively unpredictable futures. We believe that most investors, including ourselves, are unable to make a reasonable estimate of the intrinsic value of the large majority of publicly traded companies or of the stock market as a whole (which of course is largely made up of these unpredictable companies). Our view on these other companies and on the market as a whole is not negative, but simply agnostic. Rather than seeking to pass judgement on all investment opportunities, we restrict our investments to those we think we can make an informed decision about and decline to hold an opinion about investments that do not pass this test.
Investors should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The prospectus contains this and other information about the Fund. You may obtain a prospectus on this website or by calling the transfer agent at 1-800-785-8165. The prospectus should be read carefully before investing.
Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
An investment in the Fund is subject to investment risks, including the possible loss of the principal amount invested. There can be no assurance that the Fund will be successful in meeting its objectives. The Fund invests in common stocks which subjects investors to market risk. The Fund invests in small and mid-cap companies, which involve additional risks such as limited liquidity and greater volatility. The Fund invests in undervalued securities. Undervalued securities are, by definition, out of favor with investors, and there is no way to predict when, if ever, the securities may return to favor. The Fund may invest in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. More information about these risks and other risks can be found in the Fund’s prospectus. The Fund is a non-diversified fund and therefore may be subject to greater volatility than a more diversified investment.
Distributed by Rafferty Capital Markets, LLC Garden City, NY 11530.