Analysts Search for Investments

Southeastern performs all research work in-house. Our analysts are generalists, pursuing the most compelling opportunities in any geography, industry, or market cap. The cumulative experience of our team makes our universe of potential ideas large and growing. We do not use macro forecasts or benchmark weightings to determine where to search. Instead, our analysts look for individual companies that are misunderstood, underfollowed, temporarily challenged, or intensely disliked. They retain their analysis for future use, whether or not we buy the name.

When analysts' work indicates an opportunity, they prepare a detailed report which generally includes:

• Business segment analysis,
• Detailed financial model with historic and projected free cash flows,
• CEO background as well as information on other large owners and board members,
• Industry analysis describing the company's competitive advantages and primary competitors,
• Projected value growth over the next 12 months,
• The major assumptions used and how those differ from sell side projections, and
• Primary risks that would change the case.

This report is given to the full team for vetting.

Team Scrutinizes Thesis and Decides Whether to Purchase the Investment

All analysts scrutinize the report, incorporating their cumulative experience from analyzing businesses across multiple industries and countries.

The team vetting process generally includes the following:

• A "devil's advocate" is assigned to challenge assumptions, raise concerns, and review the validity of the bear case on the company.
• We visit corporate management to gauge the level of engagement, understand operating challenges, and assess capital allocation.
• We gain valuable insights through our extensive network of clients and management teams at previous investments. Having analysts on different continents broadens our contact network, helps incorporate cultural nuances, and enables more efficient management team visits.
• While geographically disbursed, the team makes decisions together which decreases the firm's reliance on any single individual and ensures that all resources are brought to bear. If the team determines that the company meets our criteria, trading receives instructions to build a position.

Analyst Monitors Investment and Reports to Team

The analysts update their appraisal and any changes to the cases following quarterly results and when significant events occur. If a company's value is flat or declines over time, or if management takes actions that destroy shareholder value, the team determines whether to move on or to take other actions to pursue value growth and recognition. We typically have multiyear holding periods. However, when a stock's price reaches our appraisal value and no margin of safety remains, we sell.