We employ a contrarian, fundamental, relative-value investment philosophy. We believe that attractive returns can be earned by constructing concentrated, diversified portfolios of well-managed, financially strong companies where the price is depressed because the company has experienced short-to intermediate-term difficulties. Earnings recovery: The philosophy is consistent with modern behavioral finance research, attempting to take advantage of investors’ overreaction to negative events. In this step, companies with depressed earnings and poor market sentiment are identified with a goal of finding investments that have the potential for a mean reversion in earnings. Multiple expansion: Often at this stage of a company’s cycle there are low expectations by Wall Street analysts and investors for future earnings, resulting in a low P/E multiple. Thorough bottom-up research attempts to identify the catalysts that will lead to a positive re-rating of the company. An investment thesis is developed that includes an upside target valuation of the company’s stock after the problem is resolved. Margin of safety: In many cases, a company with a structurally sound business can offer downside protection because past disappointments have already been priced into the stock. Independent, fundamental research is relied on to determine the nature of the problem, assess the likelihood of a solution, and gain confidence the company has the financial resources to survive the difficulty and return to quality fundamentals. When skillfully executed, this contrarian investment philosophy is designed to construct a portfolio of stocks with the potential for an asymmetric return. Only companies with the highest potential investment returns make it into the strategy. Therefore, the upside potential of the portfolio may be enhanced by earnings turn-arounds, and more powerfully, the potential expansion of the P/E ratio that a positive change in behavioral sentiment can generate.