The Partnership's investment objective is long-term capital appreciation. The Partnership seeks to achieve this objective through investment primarily in equity securities issued by companies across market capitalizations. We believe that successful investing is a result of recognizing change that is material to the operations of a company. In our experience, this change often coincides with misunderstanding and confusion that causes the securities of a business to become undervalued relative to its future prospects and peers. Our objective is to identify this dynamic change at an early stage, conduct an appraisal of the business, and assess Wall Street's perceptions. We believe a degree of misunderstanding and neglect usually results in low expectations. We look for companies that are analyzable and corporate management that is accessible. Management is usually an important shareholder in the enterprise, which enhances our common interest. Finally, comprehensive due diligence enables CRM to make security specific decisions with complete conviction. We believe that this approach allows the patient investor to weather market volatility until a stock becomes fully valued.
The investment process begins by the early identification of dynamic change that is material to the operations of a publicly traded company. CRM is attracted to companies, which will look different tomorrow - operationally, financially, managerially - when compared to yesterday. In our experience, this change often creates confusion and misunderstanding which can lead to undervaluation by the market. Examples of change include mergers, acquisitions, divestitures, restructurings, change of management, new market/product/means of manufacturing/distribution, regulatory change, etc. Once change is identified, CRM conducts an appraisal of the business by producing a financial model based principally upon projected cash flow (which normalizes the inconsistencies of GAAP reported earnings). This appraisal is evaluated in the context of what the market is willing to pay for comparable companies as publicly traded stocks and also what a strategic buyer would pay for the whole company. CRM also evaluates the degree of recognition of the business by investors by monitoring the number and opinions of sell side analysts who closely follow the company and the nature of the shareholder base. Before deciding to purchase a stock, CRM conducts an extensive amount of business due diligence to corroborate its observations and assumptions.