Buy and Sell Discipline

Each month, Century screens about 2,800 companies on a series of metrics related to profitability, growth and valuation.  Typically, 50 - 70 new companies pass the initial screens each month. Most have earnings and a return-on-equity of 15% or more.  Typically, we consider 2-5 companies each week  for more in-depth research. Each analyst has a target of visiting with at least 80 companies each year. Due diligence on a specific company can take as much as 3-12 weeks and usually includes industry research, company visits, business modeling and interviews with vendors, customers and competitors. The focus is on finding companies with recurring and repeatable revenues, high ROE, and expanding profit margins coupled with conservative accounting practices. Core positions have a target-holding period of 2-3 years.

Price targets are set for all purchases. Trimming typically begins as a stock comes within 5% of its price target. We view eroding profit margins and decelerating revenue growth as potential warning signals. The sell decision is based upon price, fundamentals and in some cases, a specific catalyst.  Catalysts that can cause a sale include a change in management, accounting or regulatory issues, and/or insider selling.