Small-Cap Growth

 

The Small-Cap Equity Composite is a diversified portfolio invested in 30 to 40 Small-Cap growth equity securities, defined as having a market capitalization floor of $350 million and inclusion in the Russell 2000 index or an equivalent, nationally recognized Small-Cap index.

Investment Process

STEP 1

Idea Generation

“MOA” (Maker of Alpha)

Proprietary stock screen run weekly

Developed utilitzing research dating back to 1935

• Identifies common characteristics of stocks in the early stage of a significant and steady price appreciation trend

 

Identifies acceleration and improvement in:

• Free cash flow

• Revenue

• Earnings

• Profit margins

• Relative strength and momentum

 

The MOA screen reduces roughly 7,500 potential candidates down to an average of 10 to 20 candidates for further analysis.

STEP 2

Quantitative Ranking

Propietary “Competitive Scoring System”

Stocks are ranked from most attractive to least attractive

 

Compares 144 variables to the industry, sector, and S&P 500

 

Provides overall score and sub-category weightings:

• Risk

• Return

• Margins

• Growth

• Turnover

• Valuation

• Balance Sheet Liquidity

• Industry Outlook

 

Setting the priorities for further review.

STEP 3

Grunt Work

Exhaustive research money managers are paid to perform

Fundamental Research: Focuses on cash flow, earnings quality, earnings estimate revisions, and debt exposure

 

Technical Research: Explores trend lines, pricing patterns, Gannangles and Fibonacci retracement lines - “Where we make the difference”

STEP 4

Portfolio Construction

Target 30-40 companies that are positioned for internally funded sustainable growth, have superior technical characteristics, and are identifiably undervalued relative to their appreciation potential