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We take a fundamental view of risk based on business valuations, a company’s capital structure, and an understanding of each investment. We do not use models for risk measurement. We strive to invest with a margin of safety by first determining what a business is worth and then buying common stock at a deep discount to that value. If the stock price isn’t sufficiently depressed relative to the long-term value of the business, or we don’t believe the company has enough financial strength to weather a difficult operating environment, we don’t invest.

We manage risk in the portfolio through position sizing and diversification. Our guidelines for maximum weights are 10% per individual securities, 40% per sector, and 10% per foreign country. Cash is used as a hedge, but will not exceed 50% of the portfolio. We do not use derivatives, options, or leverage as part of the strategy, however, investors with separately managed accounts may elect to use margin debt at their own discretion.