Berkshire Hathaway 1997 letter:

“We try to exert a Ted Williams kind of discipline. In his

book The Science of Hitting, Ted explains that he carved
the strike zone into 77 cells, each the size of a baseball.
Swinging only at balls in his "best" cell, he knew, would
allow him to bat .400; reaching for balls in his "worst"
spot, the low outside corner of the strike zone, would
reduce him to .230. In other words, waiting for the fat
pitch would mean a trip to the Hall of Fame; swinging
indiscriminately would mean a ticket to the minors.”

…and at Watchtower Associates, we agree with that statement.

Axiom 1: It is possible to discern fundamentally strong &

efficient companies from fundamentally weak & inefficient
companies.

Axiom 2: Fundamentally strong & efficient companies, at times,

sell at a discount to their intrinsic value (PV of Future Cash
Flows).

Axiom 3: It is possible to discern a fundamentally strong &

efficient company selling at a discount vs a fundamentally
strong & efficient company selling at a premium.
1. The Value Index is a proprietary algorithm that leverages current and historical Fundamental data
from SEC-filed Income Statements, Balance Sheets, and Statements of Cash Flows via 10K and
10Q submissions.

2. This provides a Fundamental-Driven, Alpha-Generating, rigorously backtested equity valuation

model for Institutional Asset Management purposes with a medium to long term investment
horizon.

Apple Inc is shown as an example of just one of the 500 S&P companies the Value Index has been ran on. Buy signals
activated when Value Index (Blue Columns) crosses an 80% Threshold (Black Line). Model generates Alpha relative to
S&P 500 Index backtested to September, 2009.