CSC Classic Value | Small Cap

• Fundamental, bottom-up stock selection process on a universe of approximately 3500 US companies with a market capitalization below $5 billion, as well 1000 non-US companies.
• We consistently run computer screens to identify "fishing pools" of statistically cheap securities and highly desirable business models. We also draw upon a deep cumulative well of investment experience and industry contacts to identify ideas. Cove Street "team tackles" fundamental business model drivers, and establishes intrinsic value targets with a multivariate approach, incorporating discounted cashflow, historical valuation metrics, and private market and asset-based valuations.
• We also pay careful attention to "management" and quantitatively review historical capital allocation decisions as well as Board composition and compensation structure. While we do not seek to run our portfolio companies, we can and have been vigilant about defending shareholder rights and appropriate capital allocation.
• CSC Classic Value | Small Cap holds 25 to 35 stocks in a portfolio, with a single security position not to exceed 10%. CIO Jeffrey Bronchick is responsible for the final portfolio decision Sector weightings are a result of the bottom-up approach, with a 30% risk limit in any single industry. We are very mindful of the negative correlation between asset growth and performance, and Cove Street will err on the side of existing clients and close the strategy in the face of aggressive asset flow.
• Less is more in regards to portfolio turnover, as experience has proven that the quality of decision-making decreases with frequency. That said, mistakes are made and our concentrated research assists in identifying errors relatively early. Stocks are also sold when their price no longer reflects a margin of safety, or we have identified materially better values in other stocks.