A: I have no favorite stocks; there may be even companies that I do not know much about, until we add them to our portfolio. I selected them because of their strong fundamental numbers that meet our requirements. When a stock no longer meets our criteria, we eliminate it and it is forgotten. We may revisit it six months later, if all of a sudden business performance improves and it reappears on our radar.

There are some 40 stocks in the fund and we follow them during market hours. That means that I know how they are doing and how they compare to the market in general. The biggest concern of investors seems to be how they are doing compared to the market, so I measure how we're doing for our clients compared to market indexes such as S&P 500.

If a stock is down a couple of dollars today, it could be for a variety of reasons. It might be down just because it is a volatile stock. If a company is run well, it can withstand some volatility, which is often part of the business.

Basically, once we've made the original selection process, running a portfolio means monitoring and knowing how the stocks are doing. We're investing in businesses with managers doing their best running their companies. It is their job.

Q:  What would trigger a sell decision? How would you describe your sell discipline?

A: If one of our stocks goes down by 20 percent, for example, and the rest of our portfolio is not down, we would have to rethink that stock. If the market is up, we would examine the stocks that are down in our portfolio, because they are acting contrary to the market. Then we would take a hard look and shore up the process.

I believe that I do have an obligation to my investors to manage the portfolio and I have an additional motive for doing well, because I have my own money into the fund. So, I do my best to tighten up the portfolio whenever possible.

Q:  You mentioned that there are some 40 stocks in the fund. What is the typical number of stocks you hold in the fund?

A: We're still a small fund, but we've recently grown from $5.5 million assets under management to almost $9 million. morningstar awarded us fi ve stars in February and, as a result, we have enjoyed signifi cant growth. Prior to that, however, the fund was about $3 million. Within that range, you can't buy 100 stocks until your fund get bigger. Therefore, we keep around 40 stocks in our fund right now.

I don't think that we need 100 stocks to diversify. We look for the best companies across various industries, and some studies indicate that you are well diversifi ed at 25 stocks, if you cross industries. you can also monitor the stocks better if they are a more manageable number. The goal is to avoid over-selection. So, the number of stocks may increase to 60, when the fund grows to $200 million. I think it is a question of adapting to the situation, but within the philosophy and the discipline, and avoiding a style drift.

Q:  What risks do you perceive and how do you monitor and control them?

A: One form of risk is the stock market risk that every investor faces. We also face that same risk, and there is not much any one individual can do to change that. There is another form of risk which is individual stock risk. I think dealing with that risk with our strategy is self-evident. Picking the companies with the best numbers through our screening and investigation process, greatly diminishes the price volatility, especially when you buy companies that pay dividends. The market supports the stocks that pay healthy and growing dividends, because such companies, typically, have a focus on increasing the free cash fl ow and returning it to the shareholder. The low-debt criterion also helps to diminish the individual stock risk. So, the downside protection is embedded in the selection process, which aims at a fundamentally strong portfolio.