RHJ’s Micro Cap Opportunities strategy employs a fundamental, bottom-up analytical process to find companies that have three primary characteristics: high earnings growth, high or improving return-on-invested capital, and sustainable competitive advantages. Our philosophy is rooted in our historical analysis that shows highest relative returns are achieved by owning companies that not only exhibit earnings growth, but also can sustainably generate high return-on-investment for long periods of time. Our investment universe consists of companies with market capitalizations under $750 million at the time of purchase.
FACTS
| Inception Date: | September 1, 2006 |
| Benchmarks: | Russell Microcap Growth Index |
| Team Managed: | Lou Holtz and Yossi Lipsker |
| Avg. Composition: | Less than 100 stocks |
PHILOSOPHY & PROCESS
RHJ’s Micro Cap Opportunities strategy seeks to achieve superior risk-adjusted performance by building a portfolio of companies with higher estimated earnings growth rates, higher returns on invested capital and better sustainability characteristics than that of the Index.- We believe that outstanding microcap growth companies share the following characteristics:
- Above average earnings growth
- High or improving Return On Invested Capital (ROIC)
- A sustainable competitive advantage
- A disciplined, fundamental bottom up research process is critical in identifying companies in the formative stages of development trading at an attractive valuation.
MODEL PORTFOLIO COMPOSITION as of March 31, 2012
| RHJ Micro Cap Opportunities |
Russell Microcap Growth Index |
||
| Number of Holdings | 54 | 875 | |
| Price/Forecast* Earnings Ratio | 36.5 | 18.3 | |
| Long Term Earnings Growth Forecast* | 22.3% | 17.8% | |
| PE/Earnings Growth [PEG] Ratio | 1.6 | 1.0 | |
| Dividend Yield | 0.6% | 0.6% | |
| Price/Book Ratio | 0.3 | 3.2 | |
| Return on Equity [5 Year Average] | 3.6 | 6.1 | |
| Weighted Avg Market Cap | $626 M | $400 M | |
| Weighted Median Market Cap | $553 M | $330 M | |
| Equity / Cash | 96% / 4% | - | |
| Portfolio Turnover [2011] | 16% | - |
Source: Rice Hall James & Associates & Independent Consulting Organizations
HIGHLIGHTS
- An analytical approach that emphasizes long-term factors that leads to longer holding periods and low portfolio turnover.
- A portfolio construction process that splits investments into three categories: growth, aggressive growth and moderate growth with limits on all three.
- A research process that emphasizes interviews with company management.
- A portfolio management team with a proven long-term track record.
