As a stock price approaches what we have historically established as a conservative estimation of a company's intrinsic value, we re-evaluate our assumptions so as to establish a new price target. Evaluation is a perpetual process. However, if the market price of a security indicates that a company is significantly overvalued than what the facts suggest to us, we will then begin to sell of our holdings.

If a holding's share price begins to materially decline, we immediately re-assess our original investment hypothesis. If our initial hypothesis remains defensible, we will either increase our position, taking advantage of a buying opportunity, or we will maintain our position.

If we discover or sense significant deterioration in investment fundamentals, we immediately scrutinize our original hypothesis. If our initial hypothesis is no longer defensible, we will preemptively liquidate our position. The usual suspects of decaying fundamentals include but are not limited to poor capital allocation decisions, deterioration in credit quality as evidenced by increasing levels of non-performing assets and net charge-offs, increasing cost of funds and "managerial stretching" (beyond a firm's historic competency).

Finally, consideration is always given to new investment opportunities that, if more attractive, may replace current holdings. So, while a stock may remain attractive based upon current assumptions, a sale may nonetheless be initiated if a greater opportunity or a better understood opportunity lies elsewhere. Having said that, we are happy to own a company indefinitely so long as the prospective return on equity capital is reasonable and our calculation of intrinsic value remains above market price.