We do not think of risk as the historical volatility of a stock, either on an absolute basis or relative to a chosen benchmark.  We define risk more fundamentally, starting with exposure to a given business and considering the possibility of a permanent loss. By that we mean a reduction in our estimate of the intrinsic value in excess of the margin of safety or discount that we believed the stock provided when we made the original purchase.

Our entire approach is downside-focused and inherently defensive. We use stringent selection criteria that lead us to only invest in well-run, financially strong, high quality businesses. We follow a rigorous process whereby we conduct our own extensive fundamental research that serves as a basis for investment decisions. Lastly, we take a value-driven approach and only buy when we believe there is significant upside potential.

While we do not allow arbitrarily set criteria to interfere with investment decisions, we are mindful of the portfolio output of our bottom-up approach, not only in terms of individual names, but also in terms of industry, geography, and currency exposure. We also carefully monitor our combined share of ownership in any given company, and we continuously manage the overall liquidity profile of the funds.