Equity Investment Process

At Bradley, Foster & Sargent, our objective is to serve our clients by helping them to preserve their capital in times of economic adversity and create wealth in more buoyant times. To accomplish this goal, Bradley, Foster & Sargent has developed an equity investment process with two main principles: identifying high quality companies – companies that we believe have competitive advantages, great brands and sound business models, good balance sheets, and strong cash flow – and investing in the stocks of these companies at favorable moments, which often happens after an event has occurred.

Identify Quality: To identify quality companies Bradley, Foster & Sargent utilizes qualitative and quantitative processes. We identify companies with strong management, a proven business model, a wide moat to protect against competitive threats, leading brands, and an excellent market position. We supplement this qualitative analysis with a quantitative assessment, which emphasizes high returns on equity, consistent growth of earnings and revenues, above average margins, balance sheet strength, and effective allocation of cash flow (including share buy backs and dividend growth). Companies which pass these and other analyses, which include company visits and brokerage reports, are approved by the Investment Committee and are placed on our Guidance List for possible use in client portfolios.

Event Catalyst: The next step in our investment process is to identify an event or a change in circumstances at a company. Investing in quality companies after an “opportunistic” event has occurred can often increase the return on investment or lower the risk profile of a given company. For example, a short term disruption may depress the price of the stock when the company’s longer term fundamentals have not changed. Examples of “opportunistic” events include a change in management, new products, changing demand dynamics in an industry, disruptive technology or regulatory changes.

Our goal is to invest in what we believe to be high quality companies at reasonable prices. This approach is intended to provide a “margin of safety” to moderate risk or enhance performance. We believe that this investment approach is a powerful tool to achieve our objective of preserving capital in poor markets and creating wealth in good ones.

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