We bought Oracle at 52% of sales. Oracle software at the time was a successful product but they had an accounting issue similar to Waste Management. The issue was not productrelated, market position or industryrelated, but the stock had been decimated. When we looked at the cash flow statements, we were comfortable with the company. The balance sheet remained healthy, but the accounting clouded the issue and we felt that the issue would eventually be resolved. We had Oracle, Applied Materials and SunGard, and I believe a total of seven companies with a market overweighting. Our companies in this sector did very well for 3-4 years.

Everybody says, “Look at Microsoft — how cheap it is compared to five years ago.” I was looking at Microsoft with our research team; it’s still selling at 5.5 times sales. As bad as it’s been from a performance standpoint, it’s not cheap. It’s not even on our radar screen. Intel is the same story, the stock is still selling at over 3 times sales. Even with poor performance for 5 to 6 years, technology stocks still aren’t cheap enough as a group, in our opinion.

Q:  How does macroeconomics factor into your thinking?

A: Minimally. In some sectors we’re more sensitive than in others, but we are bottom-up investors and we are looking at individual stocks that meet our criteria, and that’s 95% of what we do.

We are constantly looking at a company’s fundamentals and current valuations. We are not benchmark huggers. We are willing to be in or out of a sector, overweighed or underweighted depending upon where we find attractive values.

Q:  How do you go about building your portfolio?

A: We have 21 companies, but really have 42 different industries represented in these 21 stocks. Today, Berkshire, at 7.9%, is the largest weighting. Berkshire, excluding the insurance operations, is the 19th largest company in America. It has a broad base of diversified industries. We’re sensitive to portfolio diversification. The covariance of our portfolio is very low.

Q:  What do you do to mitigate portfolio risk?

A: The most important thing is the diligence with which we look at companies: What is the downside risk to our holding if we are wrong? Beyond that, we have stock an allocation limit of 8%, and an industry limit of 10%. Our portfolio is diversified by industry and by number of stocks, but the most important thing to us is the thoroughness of our investment research process.

Right now 70% of our retirement plan cash flow is flowing into this fund. Between the two funds, the fund management has $23 million of our own money invested with our fellow shareholders.