The Investment Advisory Group (IAG) is responsible for setting the firm’s investment strategy, portfolio construction, and security evaluation for all buys and sells. 

IDEA GENERATION
Stock Universe:
• All U.S. domestic stocks with market caps over $100 MM
• ADRs of foreign companies
• 4,200 stocks

Sources:
• 60% of research generated internally
• Proprietary screens
• Independent third-party research
• Proprietary Wall Street research
• Industry-specific and generic financial publications
• Conferences
• Industry meetings

IN-DEPTH FUNDAMENTAL ANALYSIS
• Historic financial analysis
• Financial projection review
• Peer group and comprehensive analysis
• Valuation of management commitment and competence
• Identify catalysts to release value
• Impact of macro economic environment
• Possible management calls/visits

BUY DISCIPLINE
• Stock trades at a discount to private-market value, earnings growth, and/or historical valuation
• Condensed written summary of fundamental analysis
• Set one- and two-year price targets
• Explains rationale for purchase and confirms adherence
   to KING’s investment philosophy

PRESENTATION TO INVESTMENT ADVISORY GROUP
• Purchase candidate is presented
• Questions are raised by all portfolio manager/analysts
• Consensus built to accept or reject candidate or request
   portfolio manager/analyst to perform further analysis
• If approved, added to buy list

PORTFOLIO CONSTRUCTION
• Typically invested over a 30-90 day period
• Holdings range from 25 to 40
• Initial position of 1%, 2.5%, 3.3%, and 5% (at cost) depending on return potential, risk, and liquidity
• Sector exposure limited to 25% at purchase
• Annual turnover between 50% and 75%

SELL DISCIPLINE
Primary reasons for selling a security are:
• Price objectives are met
• More attractive alternatives are found
• Fundamentals change

A secondary consideration is price deterioration versus a broad market index. KING's sell discipline is driven by fundamentals, but poor relative performance may cause a stock to be considered a candidate for sale.   

Positions are reviewed once they meet any of the sell criteria. Based on the underlying fundamentals they might be sold, trimmed, or held.   

Typically, when a stock appreciates and reaches a 7% to 8% weighting in the portfolio, the position will be trimmed back. A stock will also be trimmed after a significant move if the risk/reward trade-off is less favorable but the stock continues to meet the buy/hold criteria.