Harmonic’s investment philosophy is grounded by the theories presented in Benjamin Graham’s “Securities Analysis.” We believe that the best approach to investing in equities is value based, and the analysis of companies should be approached as if the public markets only exist for liquidity. We therefore value companies as if they were private, and thus focus on operating income, cash flows, and leverage. We believe that the cash flows available to shareholders should be sufficient to support our expected returns, and that leverage should not be employed as a means of increasing returns on assets. We believe that the Efficient Market Hypothesis is supportable, until the assumption that investors will act in the same way upon the information. We believe that investor behavior has a significant effect on both the moves in equities in general, and that of individual stock prices. Humans tend to favor certainty over uncertainty, and we see the same behavior in investors. Thus, companies or industries that are currently exhibiting a lack of consistency or certainty in operations, tend to be discredited by investors and trade at potentially low valuations as a result of this lack of visibility. This creates an opportunity for us to identify companies whereby the lack of visibility regarding operations is temporary, and that an improvement in operations will provide sufficient cash from operations. Additionally, the improvement in operations will attract renewed investor interest, potentially leading to returns above those generated by operations.