The process of identifying individual companies for portfolio includes screening the universe of approximately 600 small and mid capitalization financial services firms. We define "small cap" as less than $1 billion in market capitalization and "mid cap" as greater than $1 billion but less than $8 billion in market capitalization. $100 million serves as a minimum capitalization threshold for consideration in our portfolios.

Our portfolios usually contain more than twenty but less than fifty equity securities. Most of the companies in which we invest are components of the Nasdaq Bank Index. Therefore, the Nasdaq Bank Index serves as a reasonable proxy for our "investment style."

In analyzing the universe of nearly 600 publicly-traded financial services firms, we utilize a variety of sources including internally generated research, SEC filings, government mandated call reports, management interviews, census data, brokerage firm research, industry experts, and various periodicals both related and unrelated to business and investing.

Once a company is identified, and preliminary analysis suggests a compelling valuation, DRH performs thorough fundamental analysis in order to garner a comprehensive understanding of the company and to establish total return potential. We remain convinced that fundamental analysis increases the likelihood of success.

At DRH, we value a business by first understanding how a buyer of the entire business might value that business.

Often, there is empirical evidence in the form of recent acquisition activity within the industry that is useful in establishing the appropriate metric(s) for a given company. We also use history and industry accepted norms in establishing valuation metrics for certain companies. As a result, our valuation process begins with determining the appropriate metrics for valuing a given company.