Small Cap Process

In the small cap equity universe, the first step in our process is to screen all potential companies through our unique sector factors. These qualitative factors set us apart by focusing our attention on more productive industries while biasing us against the more accident-prone or difficult-to-manage companies. There are specific factors for each of the five major sectors: for consumer we avoid fashion risk, in health care we minimize our exposure to government reimbursement risk, for technology we avoid rapid product obsolescence, for industrials we look for innovators and/or problem solvers, and in financials we avoid spread businesses and focus only on niche opportunities. If a security passes this initial evaluation, it must then successfully pass the remaining two phases of our rigorous three-step research process, analysis of company fundamentals and valuation, to be included in the small cap strategy. Once we have identified a security for purchase, we will be very patient in establishing a good entry point for the investment.