The following excerpts have been taken from our full brochure (PDF format) and placed here to enhance your understanding of the charting system that we use to enhance our investment discipline.

Investment Philosophy

Conclusion
Through extensive research and analysis, we have discovered and confidently determined that thoroughly understanding and focusing on the clear correlation and functional relationship between earnings and market price leads to superior investment results with a considerable reduction in risk. It is this understanding that provides EDMP, perhaps better than any other firm, with the knowledge of what to invest in, when to invest, and ultimately when to sell any company for our clients' portfolios.

Earnings and Price Correlation
An example of one of our graphs clearly illustrates the importance of earnings. The earnings line (value line) is correlated with the historical stock price line. On graph after graph the lines will move in tandem. If the stock price strays away from the earnings line (over or under), inevitably it will come back to earnings.

The Historical Perspective
(Learning from the Past)
From a historical perspective, (learning from the past), we determine each company's normal historical price/earnings ratio ranges and forecast earnings to determine expected future normal price/earnings ratio ranges. We plot this data and produce graphs that we use to monitor each selected stock. This creates our value line of reasonableness that is "flagged" by our computer as it approaches value, producing a smaller universe (20-50 companies) that our research department prioritizes its efforts on. Therefore, though each of the companies on our larger list are potential investment choices, we are free to concentrate only on those choices that represent current values. We produce and disseminate these graphs to each of our clients on each company they own. This establishes an incredible level of communication and understanding between our clients and our firm.

End Result
This screening process results in a universe of approximately 250 to 300 high-quality growth stocks with common attractive fundamental characteristics. Each selection on these lists represents a company that we, given the proper values, would be desirous and willing to invest in. We create comprehensive historical price, earnings, and dividend databases for each company.

Business Perspective Investing
To successfully invest, the professional investment advisor must have a reliable buy discipline applied both generally and specifically. At EDMP we refer to our strategy as "Business Perspective" investing. We do not define value in the traditional below-book value approach. EDMP's value concept is oriented toward allowing us to determine the historical normal perspective, coupled with future expectations of our selections' earnings prospects. We produce both historical normal, and future value lines that guide our decision process. The historical realities merely provide a perspective of value, but we make all decisions based on our future perspective only. Graphs or pictures are produced, providing a clear perspective of our target purchase price. Our research department's computers track our universe of stocks and flag those that have approached our value line, alerting us to potential buy candidates.

When to Buy?
It is important to note that we do not make purchases based on the pictures alone. The graphs and pictures generate a "Priority Buy List" from our universe that activates an extensive fundamental analysis on each company to verify and stimulate purchase. We produce graphs and pictures of each company we purchase and disseminate them to our clients. This provides them a perspective and clear accountability of our firm's buying discipline.

Buying Axiom
We will not purchase a company unless its market price is at or below a price/earnings ratio that is equal to or less than its forecast growth rate. (P/E is equal to or less than the expected rate of change of earnings growth.)

When to Sell?
EDMP recognizes that even the best companies will, from time to time, become overpriced in the marketplace. Therefore, the successful management of clients' assets must provide the ability to recognize overvaluation to know when to sell a security, capture profits, and minimize risk. We utilize the same graphs and pictures in our buy discipline that we use in our sell discipline.

Value Time Line
Once a company's market price deviates from our established value line to the magnitude that it is more than two years ahead of its earnings justified price, our computers flag them and create a "Priority Sell List". We call this our Value Time Line (VTL). Once placed on our "Priority Sell List" we closely monitor the security regarding price momentum and market position. Simultaneously, we search our "Priority Buy List" to find an equivalent company with similar characteristics to replace it with. Special consideration is placed on equivalent dividend income streams and other fundamentals. Generally, we do not sell a stock until a suitable and equal replacement is found. The objective is to replace an equal quality growth company selling at a premium P/E ratio with one that carries a lower (safer) P/E valuation. This tactic both significantly reduces risk and enhances future potential return, while maintaining portfolio integrity.

Selling Axiom
Providing a replacement exists, we flag a security for a potential sell when its market price rises to the extent that it is two years or more ahead of its earnings justified level (Value Time Line - VTL).

Historical Perspective -"Learning from the Past"

SAMPLE CLIENT HISTORICAL GRAPHS AND CHARTS (sent to clients quarterly)

 
LEGEND:
EPS = Earnings Per Share
Change/Yr = The Annual Rate of Change of Earnings Growth
DIV = Dividends Per Share
E = estimated values

The above historical graph is presented for perspective only. Its primary purpose is to illustrate the strong correlation and functional relationship between earnings and market price (in the long-run).

Ten Year Results -Capital Appreciation and Dividends
Growing Earnings Produce Growing Dividends Called Growth Yield

Earnings Forecast

SAMPLE CLIENT FORECAST GRAPH
(Updated and sent to clients quarterly):

No buy or sell decisions are made based on these graphs alone. We produce these graphs to provide a perspective of our expectations of a company's future performance. The graphs are only used after an extensive and comprehensive fundamental analysis has been prepared.

We will not purchase a company unless its price is at or below our value corridor. We do not try to find tops or bottoms. Our goal is to make reliable long-term value purchases (buy discipline). The value corridor also lets us make objective sell decisions (sell discipline - VTL).

Our earnings line (eGR) is the result of consensus forecasts obtained from leading analysts and our own in-house research. From our earnings line (eGR) we add a plus and minus 10% deviation for error, creating our value corridor. We constantly monitor and adjust these lines to remain current (no surprises). Any changes will be noted and updated each quarter. These graphs allow our clients' and their advisors to visually recognize our future estimated target prices.