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Research

Intensive in-house fundamental research is the centerpiece of Cardinal’s investment process. The four portfolio managers and four research analysts each perform detailed company research. Each existing or prospective holding is covered by a primary analyst but investment decisions are made by consensus among the portfolio managers.

Investment ideas come from diverse areas, with the largest source being generated internally. All four portfolio managers have backgrounds that are rooted in free cash flow, the cornerstone of Cardinal’s investment philosophy. Since the inception of our value strategy we have created over 600 financial models on companies we have owned (of which over 175 models are actively updated), and we continue to build about 35 new models each year. This repository serves as a significant source of potential investments.

We gather information to aid us in determining if a business is stable and predictable and generates substantial free cash flow. Further, we seek information to assess management’s motivations and their track record in redeploying the company’s capital. In researching these issues, we spend considerable time with company management on the phone and in person after reading the publicly available financial information on file with the SEC as well as reviewing transcripts of previous industry presentations and conference calls. As a result of our preparation and the credibility we have built with many management teams over the years, we are able to have much more insightful discussions with them about the longer-term value drivers of the business