Given the importance we often put on management's ability to fix problems, it's inevitable that from time to time we'll fall in love too easily and make excuses for those in charge when the company continues to do poorly. In these cases, my patience works against me and we tend to ride a stock down [...]

Our turnover is usually in the low teens last year it was 8 percent, versus an average for small-cap value funds followed by Morningstar of around 70 percent. This is driven by the belief that if you've truly done your upfront research well, you should have the patience and courage to let ideas work. I [...]

Our rule is to own something in every sector, in part to avoid missing something important because it's out-of-sight, out-of- mind. We're not a slave to our benchmark the Russell 2000 Value Index but I typically don't go much below half, or much above twice, the index weighting in any sector. I've found that gives [...]

Part of our rationale [for holding more than 300 positions at a time] is just the practical reality of running $8 billion in a small-cap strategy with that much money, you can't hold 50 stocks without moving well out of small-cap range for many of them. Another practical consideration is our investor base, which is [...]

With large caps, regression to the mean seems to work often enough after things have gone bad, but in small caps we believe identifiable catalysts like management changes, restructurings, or maybe industry consolidation increase the odds of winning.

Speaking broadly, probably 10 percent of the businesses out there are lousy, such as selling pure commodities where the marginal cost of production drives the pricing and companies find it very hard to earn even the cost of capital over time. I may own such a company from time to time, but it's rare. At [...]

At the heart of being a value investor is having a contrarian bent. Beyond that, though, there are many different flavors of value investing. Tweedy Browne is a great deep-value investment firm. Chuck Royce at Royce Funds is a wonderful GARP [Growth At a Reasonable Price] practitioner he's focused on value but definitely doesn't like [...]