For equity accounts, we emphasize investments in companies with consistent and predictable past and projected growth in earnings and cash flow. We believe that growing earnings ultimately propels stock prices higher. Our equity selections are primarily based upon a company’s current price/earnings ratio relative to its current and expected growth rate in revenues and earnings. We are not market timers, and economically sensitive stocks are generally not considered potential candidates for our clients’ accounts. We primarily focus our investments on the common stock of large corporations where our research reveals the potential for excellent capital appreciation.

In addition to equities, many of our clients’ portfolios historically may, from time to time, contain significant holdings of U.S. Treasuries, municipal bonds, high-grade corporate fixed income obligations, and publicly traded master limited partnerships. In terms of maturities on the bond portion of our clients’ accounts, the mix of short-term vs. long-term highly-rated debt instruments will vary over time, depending upon our assessment of present and future market yields, the interest rate yield curve, and the expected rates of return for each respective instrument. A portfolio’s composition between tax-free municipals and taxable bonds at any given time will reflect the client’s income tax bracket and the need to minimize income tax liabilities.

We employ reasonable diversification to balance risk. This is accomplished by having portfolios invested in a cross-section of securities, which we follow carefully, rather than constructing a portfolio based upon a broad range of industries. We tend to take more concentrated positions in situations that appear particularly promising. Overall, we try to avoid diluting our effects by owning too many issues relative to the total account. We do not maintain high turnover of portfolios, nor are our equity purchases based upon faddish concepts in the marketplace.