The Small Cap Core strategy seeks to provide superior long-term investment returns compared to the Russell 2000 Index, while taking a low risk approach to small company investing. We believe that portfolios of neglected small cap companies with low valuations, long-term attractive business fundamentals and near-term profitability improvement potential should produce strong absolute and risk-adjusted returns over time.
Strategy overview
The team operates from a belief that strong absolute risk-adjusted returns can be generated over time by investing in neglected companies with:
- Sound long-term business fundamentals
- Near-term profitability improvement
- Low valuations at the time of purchase
Approach
Investment philosophy
- Begin with universe of approximately 2300 publicly traded companies with market capitalization ranges within that of the Russell 2000 index
- Emphasize companies in the lower end of the market cap scale, between $200 million and $1 billion, with little analyst coverage and not as efficiently valued
- In-depth and rigorous long-term fundamental research drives security selection
Portfolio construction
- Well-diversified portfolios holding 50-80 issues
- Majority of returns from stock selection
- Maximum in a single security: 5%
- Maximum in a single sector: 2x Russell 2000 Index weight
- Fully invested in equities; no market timing
- Low portfolio turnover: 30-50%